Diesel Reaches $3.908 a Gallon
This story appears in the March 21 print edition of Transport Topics.
The average price of U.S. retail diesel rose for the 15th consecutive week, bumping up another 3.7 cents to $3.908 a gallon, nearly $1 higher than the comparable week of last year, according to the Department of Energy.
As the same time, the average price of a gallon of retail gasoline rose 4.7 cents to $3.567 a gallon, 77.9 cents more expensive than the corresponding week in 2010, DOE said March 14 after its weekly survey of fueling stations.
The diesel average is now at its highest level since Sept. 29, 2008, and is 98.4 cents more expensive than a year ago.
At that price, U.S. trucking firms spent about $642 million more on diesel last week than they did in the comparable week last year. American Trucking Associations estimates that U.S. truckers burn 653 million gallons of diesel a week.
The relatively modest price increase was lower than the steep increases of recent weeks because “most of the sudden increase in crude costs [that occurred when protests and rioting broke out in several Middle East nations] has already passed through the supply chain to the retail level, and retail prices have leveled off, at least temporarily,” Neil Gamson, an economist at DOE’s Energy Information Administration, told Transport Topics.
After initially falling below $100 a barrel on the New York Mercantile Exchange early last week, the price of crude jumped back above that level on March 17 as measures to tame the crippled nuclear power plants in Japan made some progress, news services reported. However, there remained concern that a global cutback in nuclear energy following the disaster could put more price pressure on diesel as more is used in power generation.
Back in the United States, the continuing price rise was vexing large and small trucking companies alike.
“There is no secret formula on how to combat rising fuel prices,” Mike Stone, president of truckload services for Milan Express Co., Milan, Tenn., told TT. “We make every attempt possible to conserve fuel use, but we don’t do things such as hedging.”
“We do have fuel surcharges, but they don’t come near to returning to us the total impact of a fast increase in fuel costs such as we have now,” Stone said.
“Plus, vendors who supply us with products based on petroleum that we need to run our trucks, from lubricants to tires, have sharply raised their prices this year, and fuel surcharges never address that.”
Milan Express ranks No. 91 on Transport Topics’ Top 100 for-hire carriers in the United States and Canada.
Ronald Silva, owner of Westar Transport Co., Selma, Calif., which runs 50 tractors and 150 trailers, said the increases came at a particularly bad time for his fleet because it was receiving an unusually large percentage of its business from brokers.
“Normally, we get just 10% of our business from brokers, but now, it’s more like 30%,” he said. “We have surcharges built into our rates with our shipping customers, but brokers give you a take-it-or-leave it rate that supposedly includes fuel rates, but is far too low.”
Silva said that even though Westar runs routes to 11 western states, it usually fills about 90% of its fuel needs from a storage facility at its yard with diesel bought at wholesale rates.
“We have a strict rule that if a driver picks up a load in say, Portland, Ore., to take to Los Angeles, he has to stop at our offices in central California to top off his tank on the way down,” Silva said.
He stressed that the cost of wholesale fuel was rising just as fast.
“We buy a tanker full of 8,300 gallons of diesel about once a week,” Silva said. “Four weeks ago, we paid $27,500 for it, and this week $32,300.”
He said an added headache was that many of his customers have been trying to extend payment time up to 30, 45 or 60 days.
“I tell them, and they’re shocked, that I have to pay for my fuel practically in cash,” Silva said. “When a tanker comes in, they have to have a check for the previous week’s delivery first, and of course, on the road, we have to pay immediately.”
Looking ahead, EIA’s Gamson said the future of crude prices was unpredictable.
“No one has a full handle over what the consequences out of Japan will be,” Gamson said. “The various crises in the Middle East are another important factor, and that’s still not resolved.”
