Diesel Rises 11.4¢, Sets New Record at $5.623 a Gallon
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The national average price of diesel posted its second double-digit increase in as many weeks, rising 11.4 cents to $5.623 a gallon and a new all-time high, according to Energy Information Administration data released May 9.
The most recent price upswing comes on the heels of a 34.9-cent spike May 2. That means the cost of diesel has risen 46.3 cents in the past two weeks. Prices have climbed each of the past four weeks after a 7.1-cent drop April 11. Diesel now costs $2.437 more for a gallon than it did at this time in 2021.
“It’s obviously a disaster that we saw coming,” Phil Flynn, senior energy analyst at The Price Futures Group, told Transport Topics. “We’re seeing obviously a combination of factors and, of course, the Russia-Ukraine war, the ban on Russian diesel, is leaving a void. But we had a void going into this because we have been discouraging refining capacity in this country with stricter regulations.”
Flynn
The price of diesel increased in all 10 regions in EIA’s weekly survey. New England and the Central Atlantic experienced the largest gains at 23.8 cents each. The East Coast in total increased 20.6 cents to $5.907 a gallon. California experienced the smallest rise at 4.9 cents to $6.461.
“We’ve had just this perfect storm,” Flynn said. “Supplies are 26% below the five-year average. You have more risks to supply as Europe could clamp down on Russia again. We seem to be getting a little bit of a sell-off on demand concerns. Probably the biggest thing that could slow demand is if this China lockdown continues. That might present a little bit of a window. But you hate to bet on China staying shut down for a policy to keep prices down.”
The price of gasoline will hit motorists harder following a 14.6-cent jump, making the national average now $4.328 a gallon. On the West Coast it’s $5.222 a gallon. The Brent Crude Oil price index has fluctuated since reaching a peak for this year at $120.65 on March 21. The current price is hovering around $107.
U.S. On-Highway Diesel Fuel Prices
EIA.gov
“It’s painful, that’s for sure,” Hirschbach Motor Lines CEO Brad Pinchuk told TT. “Russia’s invasion of Ukraine obviously is the trigger. I just really have never seen a run-up this quickly. It’s just painful on everyone. It’s painful on our customers, obviously, having to pay much higher fuel surcharges, and it’s painful on us. We’re thankful that our customers help offset this added expense. But the fuel surcharges are not a 100% hedge for us.”
Pinchuk noted fuel surcharges don’t cover empty miles, so that expense stays with the company. They also are calculated on a weekly basis, so any change in prices over the week is not factored in.
“We’ve been on the steady increase, and the flip side happens when it goes back down,” Pinchuk said. “Then we’re paying the lower price while we’re getting the higher fuel surcharge. So assuming it goes back down, it sort of levels itself out over time. But, gosh, we’ve never obviously seen $5 fuel prices for diesel, and they just keep rising.”
Pinchuk noted those added costs don’t just impact the carrier and its customers but also are passed down to end consumers.
Hirschbach Motor Lines ranks No. 66 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
“Fuel prices definitely have an impact on smaller carriers, as they have less access to fuel discounts and they’re more likely to be working in the spot market, where the fuel is only one factor in the overall pricing and demand has a much higher impact,” Dimitre Kirilov, president of consumer services at Montway Auto Transport, told TT. “To make sure that we’re not looking at the issue one-sided, we actually have to look into historical data first.”
Kirilov
Kirilov noted diesel is up 77% compared with the same week last year. But he added that the impact on the overall cost per mile actually is about a 34% increase. He also pointed out rates in contracted general freight for a dry van have increased by 26% for the same period. In auto transport, the rate increase has only been 10%.
“Both stats show that the rates per mile in the past couple of years have significantly increased because of demand, so there is still a cushion for carriers to continue to do business without losing money,” Kirilov said. “Market conditions, however, have changed in the past few weeks and, while contracted rates in general freight have been steady, the spot market rates have dropped significantly because of a decrease in demand, and this is the real issue for smaller carriers.”
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