Diesel Prices Slip 1.1¢ to $3.869 as U.S. Crude Production Jumps

U.S. diesel prices dipped for a second week, declining 1.1 cents a gallon to $3.869 at the same time domestic crude production outpaced imports for the first time in more than 16 years, the Department of Energy reported.

The price decline was the second straight, following a 1-cent dip the previous week. The diesel average is 2.3 cents a gallon higher than it was a year ago.

Regular gasoline, meanwhile, moved up by 0.1 cent a gallon to $3.646, DOE’s Energy Information Administration said after its June 3 survey of fueling stations.

An EIA economist attributed the stability to an abundance of domestically produced crude oil at a time of moderate, stable demand.

“For diesel and crude oil, it’s been relatively stable the last month or two,” said EIA’s Sean Hill, adding that the agency’s price projection is that more U.S. crude production will drive prices generally downward over the next 18 months.

Domestic output was 32,000 barrels a day higher than imports in the seven days ended May 31, EIA reported last week.

Production had been lower than international purchases since January 1997. U.S. refineries produced at 88.4% of capacity, up from 86.4% the week before.

However, total oil stocks fell to 391.3 million barrels May 31 from 397.6 million the week before, which was the highest level since at least 1982, according to EIA statistics.

Gasoline stocks also declined but remain at the upper level of the five-year average, EIA said. Distillate inventories rose in the most recent week but are in the lower half of its average.

Crude oil futures on the New York Mercantile Exchange were largely stable last week and settled at $94.76 a barrel June 6.

On the international market, OPEC ministers agreed to keep output targets steady at 30 million barrels a day, the Associated Press reported after the 12 members of the cartel met.

Trucking managers said they were enjoying the lull in diesel price movement, giving them room to implement tactics for insulating themselves from future price increases.

“Diesel has been modestly stable the last couple of months,” said Kyle Kottke, general manager of refrigerated carrier Kottke Trucking in Buffalo Lake, Minn. Kottke has been working in his family’s business for 15 years.

“I remember when we paid 90 cents a gallon for diesel in Minnesota around the time I started. The inflation on fuel has changed how we do trucking,” Kottke said.

The company’s shippers are finding ways to book shorter moves, with average length of haul falling to 466 miles in August 2012, down from 825 miles in August 2002.

High prices also have hit truck buying, Kottke said, as the company has asked truck makers for guidance and tips on the most fuel-efficient specifications.

The carrier also is looking for a way to incorporate weight into truckload shipment charges because it costs more to move a heavy load.

“We’re more weight-conscious than ever before,” Kottke said. “Right now, if there’s a tie over whose load to ship, the decision goes to the lighter load.”

Double D Distribution near Salt Lake City shops carefully for fuel, reviewing prices daily from its preferred truck stop chain that provides discounts and dispatching drivers accordingly, said office manager Nate Ballard. The company also buys in bulk for terminal fueling.

The company’s 28 trucks get only about 5 miles per gallon in hauling 80,000-pound loads of hot asphalt over Utah’s mountain roads.

“We have what prices will be, specifically. There has generally been an upward trend, but you never know,” Ballard said when asked for a price prediction.

Meanwhile, EIA reported that gasoline prices have risen in four of the past five weeks. A year ago, gasoline averaged $3.613, or 3.3 cents cheaper than the most recent reading.

Hill said some Midwestern refinery problems have affected gasoline more than diesel.

“An Indiana refinery had a planned maintenance outage, but coincidentally there were other refineries that had issues. Markets tightened and gasoline prices skyrocketed,” he said.

The Midwestern average for gasoline was $3.838 on June 3 — more than 19 cents above the national average. A year ago Midwestern gasoline was almost 32 cents a gallon cheaper.

“The problems for Midwestern gasoline are short-term, for sure. We think the refinery units will be coming back online within the next week or so,” Hill said.