May 12, 2008 1:45 AM, EDT

Diesel Price Slips 2.8¢ to $4.149

Gas, Crude Oil Reach New Record Highs

By Dan Leone, Staff Reporter
This story appears in the May 12 print edition of Transport Topics.
The average price of retail diesel slipped 2.8 cents last week from its all-time record — the first decline in four weeks — as the Department of Energy released a prediction that prices would remain above $4 a gallon for the foreseeable future.
Last week’s dip in DOE’s weekly survey of filling stations left the diesel average at $4.149 a gallon and followed three weekly increases that added 22.2 cents a gallon to the total and left diesel $1.357 higher than it was a year ago. That means that the trucking industry last week paid about $991 million more for its fuel than in the corresponding week of 2007.
One analyst said that diesel prices have held near record levels because supplies have been consistently crimped by continued strong global demand.
“Global industrial demand has remained relatively strong,” Ryan Todd, a Deutsche Bank oil analyst, said last week during a House hearing on high fuel prices (see story, p. 4). “The result has been a significant tightening in global diesel markets, drawing down U.S. and other [nation’s] inventories.”
The average price of retail gasoline posted its sixth consecutive increase, rising 1 cent to a record $3.613 a gallon, DOE said May 5.
Gasoline is now 55.9 cents more expensive than at this time last year. That means the trucking industry, which burns about 290 million gallons of gasoline a week, paid $162 million more for gas last week than it did a year ago.
The diesel average has outstripped gasoline since the end of July, according to DOE data. As of last week, a gallon of diesel cost 53.6 cents more than a gallon of gas. A year ago, a gallon of gas cost 26.2 cents more than a gallon of diesel.
With fuel prices so high, at least one carrier has encouraged its drivers to slow down to improve mileage.
“One individual that was running at 68 mph was getting in the neighborhood of 5.3 miles per gallon,” said Perry Olsen, the fuel director for refrigerated carrier Fortune Transportation, Windom, Minn. The driver has since reduced his top speed by 6 mph and “he’s now up to over 6 mpg,” Olson said.
By improving fuel efficiency to 6 mpg from 5.3 mpg, a truck would require about 22 fewer gallons of diesel to travel 1,000 miles. At last week’s national average, that would save a carrier about $91 a truck for every 1,000 miles driven. If that same improvement was spread across Fortune’s fleet of 120 tractors it would save nearly $11,000 for every 1,000 miles driven.
Olsen said that while Fortune doesn’t govern the speed of its tractors, the company has set a fleetwide maximum speed limit of 68 mph.
Larger carriers also have started to take note of the fuel savings they can glean from slowing down their rigs.
On May 8, truckload carrier Schneider National announced it will dial down the speed governors on its 20,000-truck fleet to 60 mph from 63 mph (see story, p. 1).
On May 6, DOE said the diesel average is likely to remain above the $4-a-gallon mark into November. It projected diesel to remain about $4.14 through June before beginning a slow decline to $3.99 in November and $3.90 a gallon in December.
The projections reflect “global strength in diesel demand,” DOE said in its monthly energy outlook.
In a separate report, DOE said distillate stocks, which include diesel, fell to 105.7 million barrels in the week ended May 2, down from 118.8 million barrels a year earlier.
Domestic distillate demand rose to 4.2 million barrels a day from 4.1 million barrels a day, DOE said.
The report also said crude oil stocks fell to 325.6 million barrels, compared with 341.2 million barrels a year ago, but gasoline stocks rose to 211.9 million barrels from 193.5 million barrels.
“U.S. refining capacity . . . is maximized to produce gasoline, not diesel,” which is keeping pressure on diesel prices, Deutsche Bank’s Todd said.
Also last week, crude oil prices on the New York Mercantile exchange soared to a record $123.69 a barrel, $68.88 higher than a year ago.
Some 91 members of Congress, including House Speaker Nancy Pelosi (D-Calif.), sent a letter to the White House asking President Bush to temporarily suspend government purchases for the Strategic Petroleum Reserve.
In the letter, lawmakers said a moratorium on SPR fill-ups could lower the price of crude oil by about $2 a barrel.

Diesel Price Slips 2.8¢ to $4.149

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