DOE: Fuel Prices Won’t Spike Despite Historic Cold Snap

This story appears in the Jan. 13 print edition of Transport Topics.

U.S. retail diesel and gasoline prices edged up by less than a penny per gallon last week, and analysts said strong refinery production should prevent price spikes from the massive cold front that blanketed much of the country.

The Department of Energy reported that diesel rose 0.7 cent to $3.91, and gasoline gained 0.1 cent to $3.332. It was each fuel’s third straight increase.

Diesel is 0.1 cent lower than the corresponding week a year earlier, and gas is 3.3 cents higher.

“Refiners have been running at very high rates,” said Sean Hill, an analyst with DOE’s Energy Information Administration.

He said crude deliveries to U.S. refineries have held at more than 16 million barrels a day in five of the past six weeks, marking one of the highest December rates on record.

“Such a high-level refinery output in the last month means that we’re not short on diesel or heating oil,” he told Transport Topics on Jan. 8. “Since refineries are putting out so much product . . . we’re pretty well supplied, ‘polar vortex’ or not,” Hill said.

Last week’s record cold weather, caused by what meteorologists called a polar vortex, affected most of the United States. However, no region was hit harder than the Midwest, which got walloped with a foot of snow and subzero temperatures.

The chairman and immediate past chairman of the Indiana Motor Truck Association told TT it had to curtail some operations due to the extreme conditions.

“I’ve been at it a long time, and I’ve seen snow and I’ve seen cold, but I haven’t seen both like this,” said Doug Williams, president of Indianapolis-based Venture Logistics Inc.

The cold was so extreme — Indianapolis’ temperature bottomed at 15 degrees below zero Jan. 6 — that some of Venture’s trucks had issues with their fuel beginning to gel, which can happen if its temperature falls to about 15 degrees or lower.

“We’ve experienced some [diesel] gelling, even though we’re putting in [fuel] additives and are taking precautionary measures,” said Williams, who was IMTA’s chairman last year.

Fleets also were absorbing the expense of continued idling in order to keep trucks running and warm — helping to prevent gelling.

“We’re running trucks 24 hours a day, which adds to our expense; we figure we burn a gallon an hour idling,” Williams said.

He said some of Venture’s trucks had been stuck in its terminals for a few days. Indiana news reports showed trucks that had slid off icy highways in the cold weather.

Greg Eddy, president of Indianapolis-based truckload carrier TransCorr, said his revenue already has taken a 5% to 10% hit in 2014 because of the weather.

“Not a great way to start the new year,” said Eddy, who is IMTA’s current chairman.

The 500-truck carrier brings its drivers home on weekends, and Eddy said he kept his drivers additional days after the storm hit.

“My biggest concern is having a driver on the road and having [fuel] gel up when he’s in northern Pennsylvania, and there’s nobody around to help him and he freezes to death,” Eddy said. “That is my worst fear.”

He also said the 2013-2014 model trucks were performing better in the cold than older ones and that as of Jan. 8, the fleet’s down units were about 25% compared with a typical 7%.

As the cold snap began to loosen its grip late last week, oil fell to an eight-month low of $91.66 a barrel on the New York Mercantile Exchange.

The falling prices came despite a drop in U.S. crude supplies for the week ended Jan. 3. However, gasoline supplies jumped

6.2 million barrels and distillates, which include diesel and heating oil, rose by 5.8 million barrels.

DOE said in a separate report released Jan. 7 that it expects diesel to average $3.81 this year and fall to $3.72 in 2015, largely on higher North American oil production. Trucking’s main fuel averaged $3.92 last year.

The forecast, which was revised up 4 cents from December’s outlook, was primarily due to higher projected prices for globally traded Brent crude oil, DOE’s Hill said.

“The general story is still the same; that prices will drop with higher oil production,” Hill said.