Diesel Rises 0.6¢ to $2.732

By Michael G. Malloy, Staff Reporter

This story appears in the Jan. 4 print edition of Transport Topics.

The average cost of a gallon of diesel in the United States rose for the first time in eight weeks, inching up 0.6 cent to $2.732 a gallon, the Department of Energy reported.

Diesel had fallen 8.2 cents over the prior seven weeks after reaching $2.808 on Nov. 2, the highest price of 2009. Commercial trucking’s main fuel ended the year 40.5 cents a gallon higher than its price during the final week of 2008, DOE said after its Dec. 28 survey of fueling stations.

The price had declined 2.2 cents the previous week to $2.726 a gallon, DOE said Dec. 22. It released its fuel survey a day later than usual because of a massive snowstorm around Washington, D.C.

The biggest price jump nationwide last week — a 1.6-cent increase to $2.857 a gallon — occurred in that Central Atlantic region, which is part of DOE’s larger East Coast area.

DOE also said gasoline rose 1.8 cents to $2.607 a gallon, marking its first gain in three weeks. Despite five drops in the past eight weeks, gas is now 8.7 cents below its 2009 high of $2.694, also recorded on Nov. 2.

Gasoline ended the year 99.4 cents higher than it was at the end of 2008, which was a four-year low price of $1.613.

Diesel’s low for 2009 was $2.017 on March 16 — which was also the lowest since February 2005 — while gasoline’s was $1.684 on Jan. 5.

American Trucking Associations estimates the U.S. trucking industry burns about 752 million gallons of diesel and 285 million gallons of gasoline weekly. At those rates, truckers paid about $4.5 million more for diesel and $5.1 million more for gasoline last week than just a week earlier.

The price movements at the pump last week rose in concert with crude oil, which closed at a five-week high of $78.77 a barrel on the New York Mercantile Exchange on Dec. 28, Bloom-berg News reported.

One analyst said last week that oil and fuel inventories, which had been improving steadily for the past few months, were likely to decline in the coming weeks because of seasonal and economic factors.

“In addition to heating oil, transportation services were up with the holidays and the movement of goods, boosting de-mand,” said Andrew Reed, an oil markets analyst with Energy Security Analysis Inc., Wakefield, Mass.

“There is an upward trend in the crude price and, with the storms we’ve had recently, there should logically be an increase in [the price of] heating oil, which would support an increase in the diesel price,” he told Transport Topics on Dec. 28.

Diesel and heating oil are both distillate fuels and often compete for stocks in the winter months, which can boost diesel’s price at the pump.

One trucking company executive said last week that his company typically hedges its fuel purchases early in the year in order to save money because diesel traditionally can run higher in the winter months.

“We hedged less [in 2009] than in the past because of our business demand, but overall, it went well,” said Vince Hansen, chief financial officer of Klink Trucking Inc., Ashley, Ind.

“We like hedging because then we know where we are with our fuel costs, and it generally saves us money. This last year was somewhat of a wash, but at least we knew where we would be” with prices, he told TT.

Hedging involves agreeing to buy fuel at a set, fixed price to avoid future volatility. In Klink’s case, it also buys most of its fuel in bulk for its approximately 100-truck construction industry-oriented fleet that runs mostly local, daytime routes.

“This time of year, things are much slower than normal, so fluctuations don’t bother us as much,” Hansen said.

Meanwhile, oil ministers from the Organization of Petroleum Exporting Countries said in late December that they would hold crude oil production steady with no cuts into 2010, Bloomberg reported.

The move by the 12-member cartel, which met Dec. 22 in Singapore, was in line with analysts’ expectations and with signs that world oil demand — and prices — may be picking up, Bloom-berg said.

Several analysts said that oil could reach as high as $85 to $90 a barrel in 2010 if demand continued to climb in the United States and China.

As of Dec. 29, oil futures were trading below $79 on the NYMEX, as the U.S. dollar strengthened, Bloomberg reported.

DOE also reported Dec. 23 that oil inventories took their largest drop in three months, falling almost 5 million barrels for the previous week.

Distillate supplies fell by 3 million barrels, while gasoline fell just under 1 million barrels, the DOE’s Energy Information Administration said in its weekly report.