Diesel Rises 0.6¢ to $2.674 in Sixth Consecutive Increase

This story appears in the Sept. 7 print edition of Transport Topics.

U.S diesel prices continued their summer-long climb last week, inching up 0.6 cent to $2.674 a gallon, according to the Department of Energy retail fuel survey.

The increase in commercial trucking’s main fuel was the sixth straight reported by DOE. Diesel has increased 32.2 cents since June 1, including 12.4 cents during August, the agency said after its Aug. 31 survey of fueling stations.

While diesel is currently at its highest level of 2009, the average price of gasoline dropped for the third straight week, this time by 1.5 cents to $2.613 per gallon, DOE reported.

“Normally, we do see diesel strengthen at this time of year and gasoline weaken, and that’s, of course, due to the heating-oil factor,” said Andrew Reed, an analyst with Energy Securities Analysis Inc., Wakefield, Mass.

Tancred Lidderdale, a senior economist with the DOE’s Energy Information Administration, Reed echoed.

“Since Labor Day comes and ev-erybody’s back in school, gasoline demand really falls off,” Lidderdale said, “and we also switch to a lower-cost gasoline winter product, a lower vapor measure.”

So far this year, gasoline hit its highest average price per gallon, $2.691, the week of June 22. Gasoline’s all-time record was $4.114 a gallon in July 2008, the same month the diesel record hit $4.764 a gallon.

Trucking burns an estimated 752 million gallons of diesel and 285 million gallons of gasoline each week, according to American Trucking Associations.

For the industry, the poor economy is a weightier concern now than fuel prices, said Tom Connery, chief operating officer of New England Motor Freight Inc.

An LTL carrier with headquarters in Elizabeth, N.J., NEMF is the flagship firm in the Shevell Group.

As Connery sees it, the nation’s economic fundamentals are still too weak to expect the kind of economic rebound that will send fuel prices skyrocketing.

“We believe that [crude oil] is going to trade in this kind of narrow range,” Connery said of crude oil prices. “It went up a little bit to $70,” he said, “but I don’t know that it’s going to get much above that, based on the economy.”

As a result, NEMF has not re-sumed hedging on oil futures, as it did when prices were more volatile.

Instead, Connery said, NEMF plays the spot market, getting the best fuel prices daily.

In western North Dakota, Chuck Steffan said that he takes the same approach, getting three or four quotes each afternoon from distributors.

Steffan is chief operating officer of Missouri Basin Well Service Inc., a firm for which higher fuel prices are a mixed blessing.

The firm has 170 tank trucks hauling oil and water in the state’s rich oil basin. High crude oil prices mean peak production at wells, even in winter, Steffan said.

At the same time, however, he said he has to be vigilant about fuel costs. His tank trucks get only 5 to 7 miles per gallon of diesel.

“We get 10,000-gallon loads at a shot, probably three or four a week,” he said.

In winter particularly, Steffan’s fuel costs can be extraordinary. “In the wintertime, sometimes we don’t even shut trucks off at night because they’ll gel up in the cold,” he said, adding that wind-chill factors can be 60 degrees below zero.

Meanwhile, Reed, the ESA analyst, said the rise in fuel prices this summer was tied to crude oil prices that spiked suddenly when investors thought they saw signs of new life in the economy.

Some days, feverish trading drove crude oil prices above $70 a barrel, provoking complaints from consumers, the trucking industry and other sectors that higher fuel prices were the result of excessive speculation.

On Sept. 3, crude oil retreated on the New York Mercantile Exchange and closed at $67.96 a barrel after more Americans than anticipated filed claims for jobless benefits, Bloomberg News reported.

Looking ahead, Reed said he expects diesel prices to be relatively stable for the remainder of the year.

“I really don’t think diesel is going to strengthen [in price] much, relative to gasoline because of the large inventories,” he said. “The global stock situation is unprecedented,” Reed added.

Distillate inventories are at record highs, mirroring the poor economic climate for trucking.