Diesel Rises 2.5¢ to $3.927 a Gallon

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

U.S. retail diesel prices rose 2.5 cents a gallon to $3.927 last week, the second straight increase, the Department of Energy reported.

The increases — totaling 3.3 cents — followed declines in 12 of the previous 13 weeks, DOE said after its Jan. 28 survey of fueling stations. Prior to these increases, diesel had fallen 25.6 cents a gallon starting on Oct. 15, when it hit a 2012 peak of $4.15. A year ago, the diesel average was $3.85.

DOE also said retail gasoline prices rose 4.2 cents a gallon to $3.357. The national average for gas has risen for six straight weeks — a combined 10.3 cents — since hitting a two-year low on Dec. 17.

For the gasoline average, the 12-month high was $3.941 on April 2. This time a year ago it was $3.439.

“Typically, [diesel] prices fall in December and then go up,” said Terry Thornton, chief financial officer of KLLM Transport Services in Richland, Miss. “We’ll probably see some overall increases in fuel. There’s anticipation of corporate earnings increases in the future, and that’s why the Standard & Poor’s 500 has gone up. That means there will be more demand for oil and it will go up.”

The stock index has increased since the start of the year and is approaching its pre-recession high point.

“We enjoyed our environment last year because there was no painful spike in prices,” said Robert Ragan, chief financial officer of Melton Truck Lines in Tulsa, Okla. However, Ragan also said the flatbed carrier is moving aggressively to contain costs because diesel also can rise sharply.

“We’ve called Ryder System to talk about leasing some natural-gas trucks. We want to dip our toes into that,” Ragan said.

While much of Melton’s work entails heavy loads over irregular routes, Ragan said a dedicated contract carriage customer in Texas wants to try a natural-gas vehicle. The “Texas Clean Transportation Triangle” of Houston-Dallas-San Antonio is better equipped with natural-gas fueling options than many parts of the country, he said.

Ragan said the natural-gas effort follows upon Melton’s installation of auxiliary power units, fuel optimization software and miles-per-gallon bonuses paid to drivers.

Thornton said KLLM is testing Freightliner Cascadia Evolution tractors for claims of fuel economy.

“We’re capturing the data and analyzing it now,” he said, adding that, for a refrigerated carrier, fuel economy issues are especially important because, while fuel surcharges do a good job of compensating the company for diesel that goes into a tractor, they do not apply to the red-dyed diesel that powers refrigeration units.

“On the reefer side, there is no fuel surcharge. We can’t pass that on to shippers,” Thornton said.

Crude oil futures prices have increased in London and on the New York Mercantile Exchange but have done so more rapidly on Nymex, where they closed at $97.94 a barrel on Jan. 30, the highest level since closing at $99 on Sept. 14. The recent low closing price was $85.56 on Dec. 10.

That makes for an increase of 14.5% in almost eight weeks.

Nymex prices have been catching up with Brent crude traded in London, said Brad Simons, president of the Pathway Network, which provides oil-management services for truck stops and fleets.

Until the end of last year, much of the oil in Cushing, Okla., the basis of the Nymex contract, was “devalued by the market,” Simons said, because it was difficult to get the crude in Cushing to refineries on the Gulf Coast in Texas and Louisiana.

The reversal of the Seaway pipeline from Cushing to a terminal in Jones Creek, Texas, near Galveston was supposed to transport 400,000 barrels a day out of Oklahoma, causing prices in Cushing to rise toward the Brent level.

Bloomberg News reported, though, that the pipeline has not always worked smoothly. The wire service quoted a spokesman for one of the pipeline’s owners as saying transmission has been limited to 175,000 barrels a day.

A Jan. 30 report by the Energy Information Administration said the nation’s oil refineries have gotten busier. Refinery utilization hit 85% of capacity on Jan. 25, up from 83.6% a week earlier. A year ago the utilization rate was 81.8%.