Diesel Rises 4.4¢ to $2.616

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

The U.S. average diesel price rose 4.4 cents a gallon last week to $2.616, the seventh straight weekly increase that has pushed it up by 43.1 cents to the highest level in nearly eight months.

Gasoline also rose, for the 11th straight week, by 1.9 cents to $2.691, the Department of Energy said June 22 after its weekly national survey of retail fueling stations.

Crude oil — which sold as low as $33.98 a barrel in February — has risen steadily over the past two months to a high of nearly $73 on June 11, which has been the main reason behind the rise of retail fuel, according to analysts (click here for previous story).

Crude has dipped a bit since, closing at a low of $66.93 on the New York Mercantile Exchange on June 22, according to Bloomberg News. Crude closed at $68.67 on June 24 and was trading at just over $70 a barrel on June 25.

Analysts said retail prices would follow crude’s decline.

“Our price survey on June 22 probably caught the last bit of retail fuel’s increases tied to the recent rise in crude,” Neil Gamson, economist at DOE’s Energy Information Administration, told Transport Topics.

“It usually takes about a month for a jump in crude prices to pass through completely to retail costs, with about half the increase coming in the first week,” Gamson said. “The retail price increases we reported this week were probably from the tail end of the boost that crude gave them, with AAA’s daily prices already showing a gas decline immediately afterward.”

AAA’s Web site said June 24 that the U.S. regular gasoline price was $2.676 a gallon, a dip from the previous day’s level of $2.683. Diesel, meanwhile, sold for $2.634 a gallon on June 24, up slightly from the previous day’s rate of $2.633.

Diesel rose in every section of the country last week, reaching a high in California at $2.789, DOE said. The last time the national average price was higher was on Nov. 24, when diesel sold for $2.664 a gallon.

Gasoline climbed above $3 a gallon in one part of the country for the first time this year, reaching $3.005, also in California, DOE said.

Gasoline’s average price has risen 65.4 cents in its 11-week rise, compared with diesel’s 43.1-cent rise over the past seven weeks.

Nevertheless, the national diesel average price was still $2.032 a gallon cheaper than a year ago, and gasoline was $1.388 cheaper.

“DOE’s prices track very recent history, but it’s history none the less,” Tom Kloza, chief oil analyst at Oil Price Information Service, told TT. “Wholesale fuel prices have been trending sharply down in recent days since crude fell from its recent high.”

Kloza thought investors had bid up the price of crude until it became overpriced.

“Crude reached nearly $73 a barrel because investors were pricing it in the expectation of a perfect economic recovery occurring in the second half of this year, which they now understand is not likely to occur,” Kloza said

“The market got ahead of itself, with especially crude and gas getting too frothy,” Kloza said. “You’ll certainly see lower prices in gasoline in coming days, and it’s very difficult to see prices moving up over the summer. You’ll need a hurricane for that, or an international crisis like Iran.”

“Investors are keeping a close eye on Iran,” he added.

Hurricanes trigger investor fears and sharp crude price changes, especially if they hit oil platforms in the Gulf of Mexico or oil refineries in the Gulf Coast states.

Kloza said that diesel did not rise as sharply as gasoline in recent weeks because of investor “recognition that demand is clearly awful, and will probably remain very weak, depressed by the recession.”

American Trucking Associations and a trucking executive based in Kentucky were alike in their unease over what “speculation” might do to diesel prices.

On June 22, ATA called on Congress to increase the transparency of the futures markets and impose reasonable aggregate position limits on energy commodities.

“While we don’t believe ex-cessive speculation accounts for all of the recent run-up in oil prices, it has to have played a part,” Richard Moskowitz, an ATA vice president and regulatory affairs counsel, said in the statement.

“ATA is concerned that speculation may be increasing, as investors seek investments that can insulate them from anticipated inflation that many believe is coming as a result of the U.S. and other governments’ massive economic stimulus packages,” Moskowitz said.

Thomas Stephens, executive vice president of truckload carrier Paschal Truck Lines Inc., which operates 950 tractors and 2,900 trailers out of headquarters in Murray, Ky., is similarly worried.

“Yes, the current price hike has affected us, but a fuel optimization program that we put in two years ago has enabled us to control prices as long as they are stable,” Stephens told TT.

Paschal ranks No. 92 on the Transport Topics 100 list of the largest for-hire carriers in the United States and Canada.

“We just wish the prices would stabilize and they get all those who are hedging out of the market,” Paschal added. “If they get them out of the market, everything would be stabilized and we’d be able to operate rationally.”