September 17, 2007 7:45 AM, EDT

Diesel Price Gains 3.1¢ to $2.924

Crude Oil Tops $80 a Barrel

By Andrea Fischer, Staff Reporter
This story appears in the Sept. 17 print edition of Transport Topics.
The national average price of diesel fuel hit its highest level in more than a year last week following a 3.1-cent increase to $2.924 a gallon, the Department of Energy reported, while crude oil prices closed at more than $80 a barrel for the first time.
The diesel increase last week was the second straight weekly gain and brought commercial trucking’s main fuel to its most expensive level since Sept. 4, 2006, DOE said after its Sept. 10 survey of filling stations. It is 6.7 cents above the corresponding week of last year, and 51.1 cents above the year’s low price of $2.413, set on Jan 29.
Trucking burns an estimated 730 million gallons of diesel a week, which means the industry paid about $373 million more for diesel last week than at the end of January.
Laurie Falter, an oil industry economist for DOE’s Energy Information Administration, told Transport Topics that last week’s increase in fuel and oil prices occurred because of a “number of uncertainties in the oil markets that are adding together to push prices up.”
She said although the OPEC cartel last week agreed to boost oil production, it would not keep up with projected U.S. diesel and gasoline consumption for the remainder of this year.
“We’ve really got a gap here — and, at the same time, problems are continuing in Nigeria and everyone is worried about hurricanes” damaging U.S. refinery capacity, Falter said. “That means refiners are paying more for crude oil and as a result, they’re going to charge more for the finished product.”
DOE also said the gasoline average rose 2.2 cents to $2.818 a gallon. Gasoline, which reached a record $3.218 on May 21, has since fallen a total of 40 cents. Still, it is 20 cents higher than the corresponding week a year earlier.
Trucking burns an estimated 290 million gallons of gasoline each week.
Richard Durst, president of Arctic Express, a Hilliard, Ohio, truckload carrier, told Transport Topics that his company is choosing shippers more carefully to avoid losing money in unpaid fuel surcharges.
“We’re not recovering the full additional cost of fuel through surcharges from any of our shippers, and the higher fuel goes, the bigger that gap is,” he said.
As a result, Durst said his company “turns down loads every day because the money we make through the combination of our base rate and our fuel surcharge doesn’t cover the cost of hauling those loads.”
“It pays off to be a little bit choosy. If we were willing to take whatever [freight] is offered, we’d probably be headed out of business,” Durst said.
Similarly, Alan Usher, co-owner of Usher Transport, a Louisville, Ky., tank truck carrier, said, “We definitely refuse loads if a shipper won’t pay our full fuel surcharge. If we are hauling over 50 or 60 miles, it’s not worth the money we get paid for the load if we don’t have the surcharge.”
Usher also said his company is working on a driver incentive program to encourage drivers to increase their fuel efficiency by monitoring their tire inflation and driving below 65 miles per hour when possible.
“We’ve seen that speed makes a big difference” in improving fuel efficiency, said Usher. “Our guys who get the best fuel mileage are driving at 55 to 60 miles per hour and the ones that get the worst are driving at 70 mph.”
Meanwhile, the OPEC cartel on Sept. 11 agreed to increase crude production by 500,000 barrels per day, starting on Nov. 1, Bloomberg News reported. The increase comes on top of current OPEC supplies and takes the output target for the 10 members bound by the agreement to 27.2 million barrels per day.
Despite the announcement, crude oil on the New York Mercantile Exchange closed at a record $80.09 a barrel Sept. 13, Bloomberg reported, after rising as high as $80.18 the day before. The previous record was $78.77 on Aug. 1.
Crude inventories dropped 7.01 million barrels, to 322.6 million barrels in the week ended Sept. 7, DOE said.
Gasoline inventories fell by 700,000 barrels to 190.4 million barrels, but distillate inventories increased 1.8 million barrels to 134.0 million barrels.

Diesel Price Gains 3.1¢ to $2.924

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