Diesel Price Jumps 8.8¢ to $3.783; Gasoline Also Rises for Third Week

This story appears in the July 30 print edition of Transport Topics.

U.S. retail diesel and gasoline prices rose for the third straight week, taking back more of the substantial cost drops that dominated the second quarter of the year, the Department of Energy reported July 23.

The diesel average jumped 8.8 cents a gallon to $3.783. Since hitting bottom for the year on July 2, the average has risen 13.5 cents in three weeks after falling 50 cents the previous 12 weeks. A year ago, the DOE average was $3.949.

Regular gasoline increased 6.7 cents a gallon to $3.494. The gas average has moved up 13.8 cents in three weeks after sliding 58.5 cents in 13 weeks, according to DOE’s Energy Information Administration. A year ago, the gas average was $3.699.

EIA analyst Sean Hill attributed the increases to a recent easing of economic fears in Europe and oil supply issues in Norway. These events tightened the Brent crude oil market, which is the main driver behind diesel and gasoline prices in the East Coast and Gulf Coast of the United States.

“There is a slight lag in the price pass-through to gasoline and diesel prices as the crude comes to the market and is used by refiners, so those price increases are still being passed through,” he told Transport Topics.

Truckers in the United States are now seeing the effects of that pass-through.

“For the month of July, we’ve already seen prices go up by 30 cents a gallon in our pricing arrangements with larger vendors,” said Ted Rehwald, vice president of finance and administration for holding company Trans-System Inc., Cheney, Wash. Trans-System carriers provide flatbed, refrigerated and bulk transportation. Rehwald said the company negotiates discounts for bulk purchases with truck-stop chains, but those cost-plus and cents-off deals often swing more sharply than the retail market, he said.

A lot of freight-hauling capacity has left the market since the recession, Rehwald said, and because there is no glut of trucks, fuel surcharges are more likely to stick than they would have in 2008 or 2009.

The rise in prices for U.S. refined products followed closely after crude oil started rising in late June. However, crude prices fell below $90 a barrel for most of last week before closing at $89.39 on July 26 on the New York Mercantile Exchange. NYMEX crude was about $92 on July 19 and 20.

That recent slide, while welcomed, was not a good reason to relax, said Tony Holtberg, vice president of operations for less-than-truckload carrier Midwest Motor Express, Bismarck, N.D.

“When fuel prices were falling, oil-driven components like tires, hoses and lubes did not fall in price. It did allow us some leverage in how we operate, but oil has proven to be very fickle. No one thinks high oil prices are going away for good,” Holtberg said.

MME burns about 4 million gallons of fuel a year in its 320 power units, he said. The company’s latest project has been to monitor and reduce engine idling in the hope of improving fuel economy by 0.25 mile per gallon.

“If we get relief on fuel for a while, we just try to conserve that because we know it’s just a matter of time before it goes up again,” Holtberg said.

In February, the Energy Information Administration issued a report warning that the East Coast might be losing too much refinery capacity (3-5, p. 1), but on July 25, a follow-up report said the situation has changed.

“The previously estimated regional ‘supply gap’ of approximately 420,000 barrels per day for gasoline and ultra-low-sulfur diesel combined, that would have resulted from the idling of the three Philadelphia-area refineries, is now expected to be just 50,000 barrels per day of ULSD, with the gasoline gap disappearing almost entirely,” EIA said.

EIA said with the recently formed joint venture between the Carlyle Group and Sunoco, the Sunoco Philadelphia refinery is now expected to remain in operation. In addition, Delta Air Lines has purchased the Trainer refinery and said it plans to restart it in the third quarter.

“With these two refineries in operation, the supply of petroleum products refined in the Northeast region is expected to be much higher than in the scenario EIA considered in its February report, greatly reducing the requirement for additional petroleum products from outside the region,” the report said.

EIA said the nation’s supply of ultra-low-sulfur distillate fuels rose to 92.4 million barrels on July 20, up from 90.7 million the week before. Crude oil stocks rose to 380.1 million barrels from 377.4 million over the same time. Gasoline stocks also rose.

Staff reporter Greg Johnson contributed to this story.