Diesel Prices Sink to an Average of $4.018 a Gallon
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Diesel prices fell by an average of 5.9 cents a gallon across the country in the past week to flirt with the $4 a gallon mark, settling at $4.018 a gallon, according to data from the Energy Information Administration.
The last time the average was below $4 a gallon was in the week ending Feb. 7, 2022, EIA data shows.
Diesel is already below $4 a gallon in three regions — Lower Atlantic, Midwest and Gulf Coast. Diesel is now $1.491 a gallon cheaper than a year ago and the national average price has fallen in 12 of the past 13 weeks, the data shows.
The price of diesel fell in eight regions, including a high of 7.8 cents a gallon in the East Coast, and rose in two regions. Meantime, the national average price for gasoline dropped 5.6 cents to $3.60 a gallon.
On-Highway Diesel Fuel Prices
Source: EIA.gov
Despite the elongated downslope, truckers continue to be squeezed, Artur Express Inc. Vice President of Operations Mark Koch told Transport Topics.
Diesel prices have not fallen as steeply as freight rates, which are drastically lower than a year ago, Koch said. Artur Express ranks No. 96 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
Trucking companies’ biggest cost is expected to decline further, Koch said, but prices are unlikely to return to historic levels below $3 a gallon.
Prices are falling on the back of demand weakness. Macroeconomic factors are dragging consistently on demand,
Brian Partee, senior vice president of fuel products at Marathon Petroleum, said during the company’s first-quarter 2023 earnings call May 2.
In the first quarter of 2023, U.S. real GDP decelerated to a 1.1% annual pace as higher interest rates took a toll on the housing market and businesses reduced inventories even as consumer spending increased, data from the Bureau of Economic Analysis shows. The broadest gauge of economic output grew 3.2% in the third quarter of 2022 and 2.6% in the final three months of 2022. Inventories are trimmed historically when companies anticipate a downturn.
American Trucking Associations Chief Economist Bob Costello said April 28 that the $138.2 billion decrease in the value of inventories trimmed 2.26 percentage points off the first-quarter reading. Had the inventory reading been neutral instead of a drop, GDP would have increased 3.5% instead of 1.1%.
But for motor carriers, the significant decline in inventories is a good thing as it means retailers and other businesses made significant progress clearing out bloated stocks, according to Costello. Said excess inventory in several parts of the economy has been a headwind for truck freight volumes over the last year, he added.
On top of what has gone on so far in 2023, confidence in the economic picture — and therefore diesel demand — for the rest of 2023 is waning. The Conference Board’s benchmark Consumer Confidence Index fell in April to 101.3 from 104.0 in March, the nongovernmental organization said April 25.
The Conference Board’s Expectations Index, based on consumers’ short-term outlook for income, business and labor market conditions, fell to 68.1 from 74.0, it said. The Expectations Index has remained below 80 — the level associated with a recession within the next year — every month since February 2022, with the exception of December 2022, it added.
“April’s decline in consumer confidence reflects particular deterioration in expectations for consumers under 55 years of age and for households earning $50,000 and over,” Ataman Ozyildirim, senior director of economics at The Conference Board, said in a statement accompanying the data release.
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