Diesel Slides to $3.976 a Gallon In Fifth Straight Weekly Decline

This story appears in the Nov. 26 print edition of Transport Topics.

The national average price of diesel fuel slid four-tenths of a cent to $3.976 a gallon, the fifth straight weekly decline in the cost of trucking’s main fuel, the Department of Energy reported last week.

Since Oct. 15, when diesel was at a four-year high of $4.15 a gallon, the price has fallen 17.4 cents. Diesel dropped below $4 a gallon for the first time in three months on Nov. 12 and is now 3.4 cents lower than it was at this time in 2011.

Meanwhile, the price of gasoline dropped two cents to $3.429 a gallon, DOE said. Despite the price of gas having slumped for six straight weeks, it’s still 6.1 cents higher at this time than it was a year earlier. Gasoline has tumbled 42.1 cents since Oct. 8.

Some analysts said the downward pricing was against the usual trend.

“Usually, it’s picking up this time of the year,” said Kyle Cooper, principal in Houston energy consultancy IAF Advisors. “We’re seeing some pullback in crude in general because of overall concern about the economic climate worldwide,” he said. “Diesel is my proxy for all economic growth around the world.”

Tancred Lidderdale, senior economist with DOE’s Energy Information Administration, said his agency had forecast diesel prices to fall. In EIA’s September forecast, made when crude was $114 a barrel, “we forecast $4.01 for November,” Lidderdale said. “Of course, what’s fallen is gasoline prices.”

Crude declined $2.53 to close at $86.75 a barrel Nov. 20 on the New York Mercantile Exchange. Bloom-berg said crude prices have dropped 12% overall this year.

Cooper warned that trucking companies could see diesel’s downward price trend reversed if Congress and the Obama administration reach a compromise on taxes and spending.

“You certainly will have an uptick in distillate prices driven by the equity markets. You’ll also see a rally in stocks, and fuel prices will go higher,” he said.

Many economists believe that if a Congress and the White House can craft an agreement to avoid the impending spending cuts and tax increases, then economic growth will increase, pushing demand for fuel. While the Energy Department’s survey showed the average diesel price dipped last week, not all trucking companies agreed that retail prices were lower.

Jon Guss, president of small, heavy-equipment hauler, Red Rock Transfer, of West Valley City, Utah, said pump prices average $4.25 in his area. “We get sometimes only one mile to the gallon, so fuel for us can be a real killer,” he said.

“It just changes so much,” Guss said. “You run up to Idaho, and you’re 20 or 30 cents less.” The average diesel price for the Rocky Mountains region was $4.06 last week, DOE said.

Red Rock Transfer operates 15 heavy-duty tractors but is downsizing to about four because of the economy, Guss said.

Ed Davis, operating manager at flatbed hauler First Class Service Trucking Co., Tracy, Calif., said diesel pump prices are still more than $4.02 a gallon in most areas. But he said there has been some improvement in the past few weeks. “I’m looking at my fuel bills from the end of October, and I see $4.22, $4.21, even $4.36,” Davis said.

First Class operates 25 tractors in California, Nevada and Arizona, he said.

Despite lower diesel prices across the country, Davis said he isn’t optimistic about the trend lasting. “Usually the price depends on what crisis is going on in the world,” he said.

“California had their issues on prices because of the refinery problems,” DOE’s Lidderdale said, but such events are temporary market disruptions.

“Diesel is still tracking oil prices, and if history teaches us anything, it’s that they’re volatile,” he added.