Diesel Price Gains 0.9¢ to $2.928 a Gallon

This story appears in the Aug. 9 print edition of Transport Topics.

The U.S. diesel average price rose 0.9 cent to $2.928 a gallon last week, the second straight gain, but just the third increase in the past 12 weeks, the Department of Energy reported Aug. 2.

The retail gasoline average price fell 1.4 cents to $2.735, marking its first decline in three weeks but the third in seven weeks, DOE’s Energy Information Administration reported after its Aug. 2 survey of fueling stations.

On the New York Mercantile Exchange, oil prices jumped to a three-month high on Aug. 3, closing at $82.55 a barrel, after trading around $78 during the previous week. Oil closed at $82.01 on Aug. 5.

Andrew Reed, an analyst for Energy Security Analysis Inc., said he does not anticipate pump prices will increase much in the near term.

“With sluggish demand and plenty of inventories, there isn’t really much in the fiscal markets to push crude higher than it is,” Reed said.

“After some signs of demand strength in May, we’ve had a couple of bearish signals lately,” Reed said. “I really don’t expect diesel demand in itself to be driving up prices too much. It’s really about the underlying crude price.”

Prior to the two most recent gains, diesel had fallen 6.2 cents over the previous four weeks. The price is now 19.9 cents below the year’s high of $3.127 in May, but 37.8 cents higher than the same week last year, EIA said.

The gas price decline left gas 17.8 cents higher than the same week a year ago.

Although the diesel price has been fairly stable this summer, fleets said it is never a factor they can ignore.

Richard Strobel, senior vice president of G&P Trucking, Gaston, S.C., said his company buys fuel in bulk, which it stores at five company yards, sometimes as much as 10,000 gallons of diesel a month.

“Nothing to get us in trouble, but sometimes based on what the market’s doing it will give us a little bit of an advantage,” Strobel said.

The truckload carrier governs its 550 tractors at 65 miles per hour and instructs drivers where to purchase fuel. It also equips some of its vehicles with fuel-efficient tires and other aerodynamic technologies, providing small increases in fuel economy.

At Hager City (Wis.) Express Co., owner Bill Schroeder said he started experimenting with auxiliary power units after receiving a federally funded anti-idling grant run by Wisconsin that pays half the cost of an APU.

After two years of waiting, Schroe-der said, in June he received enough funding to put APUs on two of his 25 trucks.

Although Schroeder said he does not yet have data on fuel savings, his trucks are forced to idle because drivers can be on the road for eight days straight and sleep in their cabs.

“We were up to 40% idling time on some [trucks], so, hopefully, [adding APUs] cuts them down dramatically,” he said.

John Yandell, president of truckload carrier Yandell Truckaway, Oakland, Calif., said that his company continually strives to further minimize empty miles.

“We’re trying to work within a 250- to 300-mile range out of the San Francisco Bay area, filling all those lanes of traffic. I would say that probably 50% to 60% of the time we’re able to get round-trip miles.”

Yandell Truckaway operates 125 tractors and hauls mostly food-related products and wine. Although the carrier is close to refineries in the Bay area, Yandell said diesel is more expensive close to home. For that reason, he encourages his drivers to refuel farther from the company’s home base.

“If I get 50 or 75 miles down into the Central Valley — Sacramento, Stockton and Modesto — the price is lower,” Yandell said. “Don’t ask me why.”

He also encourages his drivers whenever possible to pay for diesel in cash because prices can be 5 cents to 7 cents lower per gallon than when using credit cards.

Meanwhile, EIA economist Neil Gamson said he expects diesel to rise slightly in upcoming weeks.

“We see diesel prices hitting over $3 by the end of the year, and continuing a slight increase in 2011, reaching as high as $3.19 average by the fourth quarter of 2011,” Gamson said.