Editorial: The Number 1 Returns
Modern American business is a blizzard of numbers. If you can’t measure it, you can’t manage it, the business school mantra goes.
Our website reports economic statistics on a daily and often hourly basis. Meanwhile, obsessed baseball fans argue about which of the dozens or even hundreds of available statistics are most important to consider when evaluating a player’s worth.
It takes patience to wade through this blizzard. Remember Mark Twain’s observation that there are lies, damned lies — and statistics.
For this week at least, though, we’d like to pause and note the return of the number 1 with respect to the national diesel average. As in, the retail diesel average was $1.98 per gallon Feb. 15.
In this context, the 1 has been absent for more than a decade, since Valentine’s Day 2005. Regular gasoline is down even lower to the $1.70 range.
Two-dollar pricing was fairly common, and then trucking had to get used to the $3 range. When $4 entered the realm in 2008, it seemed like blood-drenched savagery and sub-$2 prices were thought to be gone for good.
Crude oil, the main ingredient for diesel, often has been thought to be impervious to market forces. Considering the nature of OPEC, the involvement of national governments and the private sector in the oil industry, this is not a classically competitive market the way trucking is.
Still, there definitely is a market at work. The 2008 price spike was “irrationally exuberant,” and when it no longer could be sustained, the price blew out hard. The market craziness since 2000 drew in new investment and technology that led to the North American fracking boom that produced the current price plunge.
The fall in oil prices has caused a lot of domestic production to dry up. Trucking company vendors that support the oil and gas industry were among the first to learn of this.
Don’t be surprised if the pullback in U.S. oil exploration leads to a price increase, although Iran is eager to pump as much oil as it can these days.
A wise owner-operator who spoke to our fuel reporter had an interesting take on this. He’s enjoying the decline in costs when he fuels up but thinks this also is drawing in new competition to the market. He also said he misses the extra loads that used to be around.
We will place no bets on how long these prices will last, but seeing the re-emergence of the number 1 has been noteworthy.
