Diesel Rises 7.5¢ to $2.625

This story appears in the Aug. 17 print edition of Transport Topics.

The average retail price of a gallon of diesel in the United States rose 7.5 cents last week to $2.625, the highest level this year, the Energy Department reported.

The average price of gasoline rose even more, climbing 9 cents to $2.647, which was near the top price for 2009. Prior to last week, the top diesel price of $2.616 was reached in the survey of filling stations on June 22, the same week the highest gas price of $2.691 was recorded.

The price for trucking’s main fuel has risen nearly 61 cents since hitting a low of $2.017 in the March 16 weekly DOE report. It has gained 12.9 cents in the past three weeks, after falling by 12 cents in the four weeks before that.

“Despite the recent seesaw, the price today isn’t much different than the price a month and a half ago,” Tancred Lidderdale, a DOE analyst, told Transport Topics on Aug. 12. “The price of diesel has essentially followed crude oil. As crude prices have come back up, so has diesel.”

Crude prices peaked in early June at $72.68 a barrel on the New York Mercantile Exchange, dipped below $60 last month and late last week topped $70 again.

Fleet executives were perplexed by those fluctuations, suggesting that the price was being manipulated. “It’s a knee-jerk reaction when prices change,” said Alex Soutter, comptroller of Portland Air Freight, which operates 75 tractors to deliver air cargo and in over-the-road service.

He noted that the price of crude oil rose 25 cents overnight to $69.70 from Aug. 11 to Aug. 12, even though there were no announcements that would have affected fuel prices.

He believes the recent rise in prices is because of a combination of growing speculation and the decline in the value of the dollar, the currency that’s used as a basis for crude prices.

“We have been doing things a lot smarter,” he said, after last year’s fuel price increases prompted the company to govern speeds, limit idling and consolidate routes to save fuel.

Two hours north of Portland in Bangor, Maine, another trucker had a different perspective.

“We can’t figure it out,” said Gerry Patry, comptroller of Pottle’s Transportation, when asked why diesel prices are rising at a time of swelling inventory and weak de-mand for trucking.

Patry said that just three weeks ago, Pottle’s paid $2.22 a gallon for fuel at its own terminal. By Aug. 12, the price had climbed 44 cents a gallon, or 20%.

“It’s a gamble,” he said as the company weighs whether to lock in prices, with the goal of controlling costs for empty miles that don’t generate revenue.

“You need to pay attention to the details from day to day,” he said, noting that the company — which has 112 power units — gives drivers daily advice on fuel purchasing. On Aug. 12, for example, diesel was $2.50, or 16 cents cheaper at a New Hampshire TravelCenters of America truck stop than Pottle’s terminal price.

“I am not sure how they [oil companies] are justifying the rise in fuel prices,” said Dwight Dunsworth, vice president of Bernard Pavelka Trucking. “Some of it is futures pricing. That is the kind of thing that got us in trouble last year — all the trading on the futures market that we [truckers] don’t have control over.”

Last summer, financial speculators were blamed for driving crude oil prices close to $145 a barrel. American Trucking Associations and other groups now are pressing federal regulators to take steps to prevent a repetition of last year’s market dislocation (click here for related story).

At this time last year, diesel was at $4.35 a gallon, a near-record level, and gasoline was $3.809.

Pavelka Trucking, which is based in Hastings, Neb., carries refrigerated and dry van freight and is trying to save money by directing drivers to lower-cost fueling locations, using auxiliary power units and minimizing empty as well as out-of-route miles, Dunsworth said.

“As the fuel price goes up, we have a fuel surcharge, but we are always a week behind in getting the surcharge to where it needs to be,” Dunsworth said. “With freight volumes down this year, there is not as much [profit] margin.”

DOE said it expects fuel prices to remain relatively steady at current levels, based on the monthly outlook issued Aug. 11. It said crude would average $70 a barrel in the fourth quarter, and rise slowly to $72 a barrel next year, the same as its July report.

The latest survey forecast diesel prices will average $2.46 this year, the same as last month, and $2.84 next year, 5 cents more than the previous estimate.

“We are looking at a price path that reflects the expected slow recovery in the economy,” Lidderdale said. “We have been living with the same uncertainties [such as Mideast oil supply] for several years.”