Diesel Rises 1.8¢ to $2.60

This story appears in the Oct. 19 print edition of Transport Topics.

U.S. retail fuel prices snapped a steady string of declines last week, as the average cost of a gallon of diesel rose 1.8 cents to $2.60 a gallon, and gasoline climbed 2.1 cents to $2.489.

In its Oct. 12 weekly survey of filling stations, the Department of Energy reported that diesel prices had risen for the first time in six weeks; gasoline prices had fallen eight straight weeks before the increase last week.

An oil analyst said the price increases defied market fundamentals.

“We have more inventories of everything — diesel, oil, gasoline — than we know what to do with,” said Roger McKnight, senior petroleum analyst for En-Pro International Inc., Oshawa, Ontario. “This is an artificial situation. Everyone is looking at the stock market, and they’re anticipating an increase in demand.”

McKnight said traders have become overly optimistic about future crude oil demand because of signs of improvement in U.S. equity markets, which rallied last week in response to positive data on inventories and retail sales (see story, this page).

However, McKnight said that crude oil reached a one-year high last week, and expectations of higher demand have had a similar effect on refined fuel prices.

In addition, “low temperatures in the Northeast U.S. are causing concern about rising demand for heating oil,” McKnight said.

The latest diesel price increase followed five consecutive declines that reduced the price of trucking’s main fuel by 9.2 cents a gallon.

Diesel is now $1.059 a gallon cheaper than at this time last year and has fallen 45.4% from its July 2008 record of $4.764 a gallon, DOE said.

Gasoline is down 66.2 cents year-over-year and has fallen $1.63 a gallon, or about 39.5%, from its July 2008 record of $4.114 a gallon, according to DOE. The latest gasoline increase followed eight consecutive drops that cut the fuel’s average price by 17.9 cents a gallon.

One carrier said the best way to trim fuel costs is to train drivers to burn less of it.

“We have a program in place, a bonus program, for the drivers,” said Paul Moore, vice president of Nationwide Transportation Inc., a truckload carrier in Omaha, Neb. “That probably has helped more than anything.”

Driver training, Moore said, yields savings, regardless of the cost of fuel.

He said Nationwide trains drivers to operate their trucks at optimal efficiency, encouraging them to accelerate slowly and drive in high gear to assure maximum engine efficiency.

Nationwide examines drivers’ average miles per gallon over three-month periods and awards bonuses to those that improve their figures.

Since the incentive program started in late 2007, Nationwide’s average fleetwide fuel economy has improved to 6.5 mpg from about 5.6 mpg, Moore said.

The new rate means that Nationwide’s 120-truck fleet could squeeze about 1.1 million miles out of the 170,000 gallons of diesel it burned this September. Burning the same amount of diesel at the old rate would cover about 952,000 miles.

Moore said that Nationwide uses cab heaters to cut idle time and keep drivers warm during winter months. However, the fleet so far has been leery of employing auxiliary power units.

With APUs, “We’ve never gotten comfortable with the math on capital outlay versus the payback period and maintenance costs,” Moore said.

Michele Calbi, a vice president of Swift Transportation, said that, in general, recent truck design im-provements have helped “dramatically” increase fuel efficiency for the Phoenix-based truckload carrier’s fleet of more than 17,000 tractors.

“We’ve seen mpg go up dramatically,” Calbi said. “It’s more related to what we’ve changed in our fleet and what the [original equipment manufacturers] have changed in the design of their trucks — more aerodynamics, fairings, maintaining proper tire pressure,” for example.

Together with internal initiatives, including software-assisted fuel-routing optimization, these improvements have helped Swift save about $36 million annually on its fuel bill, Calbi said.

Like Moore at Nationwide, an executive with truck rental and leasing company Ryder System, Miami, also said that driver training was a “major factor” in fleet fuel efficiency, even with improvements in truck design.

“Truck-design specifications are key,” said Scott Perry, Ryder’s group director of vehicle supply management. However, “you have to be very, very informed of the benefit of those specifications. Drivers will continue to be a major factor in fuel efficiency on the vehicle itself.”

As diesel and gasoline increased, crude oil futures on the New York Mercantile Exchange last week closed above $75 a barrel for the first time in a year, Bloomberg News reported.

Crude prices rallied on Oct. 15 after a DOE report showed that U.S. stockpiles of gasoline fell by the most since last September, and refiners idled capacity to perform seasonal maintenance ahead of the home heating oil season.

Gas stocks fell 5.23 million barrels while refinery utilization, a measure of operable U.S. crude refining capacity, dropped to 80.9%, the lowest level since the spring.