Diesel Prices Slide 1.7¢ to $3.894, 12th Decline in Previous 13 Weeks

This story appears in the Jan. 21 print edition of Transport Topics.

U.S. diesel prices continued to drift downward last week, declining 1.7 cents to $3.894, the first time since early August it has been below $3.90, the Department of Energy reported.

It was the seventh straight weekly slide for diesel prices, which have fallen during 12 of the past 13 weeks. A year ago diesel cost $3.854.

“Diesel is still high,” said 15-year trucking veteran Charlie Price, equipment manager for Dedicated Logistics in Crossett, Ark., “but I guess when you consider the last five years, they’re about medium now.”

Meanwhile, gasoline prices rose for the fourth consecutive week, DOE’s Energy Information Administration said after its Jan 14 survey of fueling stations. Gasoline inched up 0.4 cent a gallon to $3.303, which is 8.8 cents below the year-ago level.

The high point for diesel over the past 12 months was $4.15 a gallon on Oct. 15. Since hitting that peak, the national retail average has declined every week but one. The 12-month low was $3.648 on July 2.

The recent high for gasoline was $3.941 on April 2, and the low was $3.254 on Dec. 17.

Crude oil prices have been steady on both the New York Mercantile Exchange and the London futures market since the start of the year.

“We’re definitely not in a recession now, but the numbers we’re seeing on oil and petroleum usage are like a recession. We’re seeing very, very poor levels of domestic demand,” said Tom Kloza, chief oil analyst at Oil Price Information Service in Wall, N.J.

Diesel and gasoline prices still have room to dip further, Kloza predicted, especially if winter in the Northeast remains mild to moderate, suppressing demand for home heating oil — a distillate fuel, as is diesel.

On Jan. 17, the price of a barrel of crude closed at $111.10 in London and $95.49 on Nymex — a four-month high.

The recent calmness in prices was welcome news for fleet managers, but there is no confidence this will be a durable trend.

“It’s nice to see them moving in the right direction,” said Ron Niemoth, chief financial officer of Seward Motor Freight in Seward, Neb. “I think prices will bounce back up. It would be great if they dropped for a year, but you know they won’t.”

Seward has 125 trucks for moving general commodities in dry vans. Niemoth said the company burns 150,000 to 185,000 gallons a month. To stretch the company’s fuel budget, Niemoth said truck speeds are governed, sometimes as low as 62 miles per hour, and the carrier has installed auxiliary power units to provide heating and air conditioning without engine idling.

Niemoth said he monitors diesel prices closely and updates Se-ward’s fuel surcharge every Monday afternoon.

“If you don’t collect a fuel surcharge, you were out of business five years ago,” he said.

Price of Dedicated Logistics said his fleet of 48 trucks uses about 130,000 gallons a month. The company buys fuel at truck stops, rather than in bulk, but negotiates buying programs that can sometimes result in discounts of 20 cents to 30 cents a gallon.

OPIS’ Kloza said that, while political events in oil-rich sectors of the Middle East can whipsaw petroleum prices on short notice, for the moment, there are no “terrible calamities in hot spots now.” That means supply-and-demand fundamentals can play more of a role in determining prices. Also, EIA describes a marketplace with strong domestic production, ample supplies of petroleum and demand for products that is stable.

On Jan. 16, EIA reported that the usage rate for all U.S. distillate fuel oils dipped to 3.375 million barrels a day, the lowest level since August 2009, shortly after the recession drove the economy to a low point.

The nation’s refineries slowed operations somewhat, producing at 87.9% of capacity, down from 89.1% the week before, EIA reported.

Also in its report, EIA said the national stock of ultra-low-sulfur distillates rose to 102.9 million barrels. On Nov. 9 it was 81.1 million barrels. The last time the inventory was this high was Feb. 17, according to the EIA database.

Another reason for the high inventory level is domestic production of oil, which the Energy Department said is at its highest level since 1993.