Diesel Rises 3.6¢ to $3.903 in Third Consecutive Gain

This story appears in the July 29 print edition of Transport Topics.

Retail diesel prices continued to climb last week, with the national average rising 3.6 cents to $3.903 a gallon, the third straight weekly increase, the Department of Energy reported.

At the same time, the gasoline average jumped 4.5 cents to $3.684 a gallon on the heels of a 14.7-cent increase the prior week, DOE said after its July 22 survey of fueling stations.

Diesel was selling for 12 cents more than it was a year ago, but nearly 26 cents a gallon less than it cost in late February; gasoline was 19 cents higher than the same time last year.

Sean Hill, an analyst with DOE’s Energy Information Administration, said the fuel increases have closely tracked a spike in the cost of crude oil, but gasoline has been more volatile in recent weeks because of refinery outages.

Crude closed at $105.49 on the New York Mercantile Exchange on July 25, almost $3 below its nearly 17-month high of $108.05 on July 19.

Crude sold for $95 a barrel a month ago and about $89 a barrel a year ago.

Hill said gasoline is more in demand during the summer because of increased recreational driving, and diesel is less sought-after than during the winter heating season.

“Diesel demand is relatively stable right now, while gasoline demand has increased the past few weeks and the effects of refinery outages are more pronounced right now,” Hill said.

Even so, U.S. refineries have been operating at more than 92% of capacity in the past three weeks, well above average, Hill said.

“That is by far the highest of the year,” Hill said. “In March, it was at 82% or 83%,” he said.

The high cost of diesel is the reason Deep South Freight, a small Birmingham, Ala., carrier created a “three-tier” or priority fuel purchase system to guide company drivers, said Kris Kohls, chief operating officer.

Choosing the right stops to purchase diesel can easily save the company $100 a truck per week, Kohls said.

“We recently revisited our fueling network and partnered with a couple of strategic fuel providers where we can leverage the best possible pricing that most closely fits our freight network,” Kohls said.

Deep South divided truck stops into three categories: low-cost, mid-cost and high-cost.

Kohls said that not only are drivers encouraged to plan their trips to refill at the cheapest refueling stations, but the company analyzes fuel costs to help it determine “freight flows,” or which lanes to service.

“We push as many gallons as we can through the states of Alabama, Mississippi and South Carolina, where we know we can get the best prices regionally,” Kohls said. “We keep that in mind as we market our freight services to customers.”

Kohls said the second-tier states, or more expensive, include Ohio, Georgia and Texas. The most expensive fuel states, which the carrier avoids, include Florida, Wisconsin and Illinois, he said.

Deep South operates about 80 trucks — half of them dry vans and the other half dump trucks.

Kohls said that if he has a choice to run a truck from Alabama to North Carolina or Alabama to Wisconsin, he chooses the lane to North Carolina.

“That would be preferential to running a truck from Alabama to the state of Wisconsin, where I know I’m going to pay as much as a 40-cent difference for fuel,” he said.

For example, one day last week, diesel fuel near Meridian, Miss., was $3.38 a gallon but $4.05 a gallon in Chicago, Kohls said.

“Fuel is the No. 1 cost in our business,” Kohls said. “We can’t control the price of oil. But we sure can determine at what stops we purchase and where we top our tanks.”

Paul Darwin, general manager of Pope Trucking Inc., Pearson, Ga., said his fuel savings strategy has centered on buying trucks with rebuilt engines and transmissions.

The company owns 16 trucks and operates an additional 65 trucks either owned or leased to owner-operators, he said.

“We had a lot of the old, long-nose Peterbilts that got about 5 miles to the gallon,” Darwin said.

The newer trucks increased the company’s fuel economy to 7 miles a gallon or more, he said.

“We figured on a 2,500-mile week, one mile to the gallon is $480 in savings,” Darwin said. “So if you can get 2 miles more to the gallon, you’re $960 a week ahead.”