Fuel Jumps 11.6¢ to $3.396
By Frederick Kiel, Staff Reporter
This story appears in the Feb. 25 Print Edition of Transport Topics
U.S. retail diesel prices soared 11.6 cents last week to a national average of $3.396 a gallon, the highest level since early December, the Department of Energy reported.
Meanwhile, the price of crude oil in New York closed above $100 a barrel for the first time.
DOE reported after its Feb. 18 weekly survey of fueling stations that the average price of gasoline also jumped 8.2 cents a gallon to $3.042.
“Two main factors pushed up the price of fuel last week, especially diesel,” said Laurie Falter, an analyst at DOE’s Energy Information Administration. “They are the rise in crude oil prices and demand for heating oil, which comes from the same part of a barrel of crude as diesel.”
On Feb. 19, crude oil on the New York Mercantile Exchange closed at $100.01 a barrel, up $4.51 for the day, Bloomberg News reported. It was the first time crude closed above the $100-a-barrel level, although it trickled down the following day.
Meanwhile, fuel increases last week left retail diesel 90.5 cents higher than the corresponding week of 2007, and gasoline was 74.6 cents higher, DOE said.
American Trucking Associations estimates that the trucking industry consumes 730 million gallons of diesel and 280 million gallons of gasoline weekly. At that rate, truckers paid $660.7 million more for diesel and $208.9 million for gasoline last week than the corresponding week in 2007.
The diesel average hit a record $3.444 on Nov. 26, before falling as low as $3.259 a gallon on Jan. 28.
“This price increase is not a good situation for trucking firms,” said Chris Brady, president of Commercial Motor Vehicle Consulting. Truckers can recoup only about 85% of the increase in diesel prices with fuel surcharges, because companies cannot collect for deadhead miles, Brady told TT.
“Everyone always said that high fuel prices were just temporary and will go down, which led to unstable fuel surcharges, but I believe most people have accepted the fact that these prices are permanent,” said Eric Starks, president of the trucking forecast firm FTR Associates. Continued high prices “will give truckers the opportunity when they negotiate new long-term contracts with shippers to say, ‘We have to find a way where everyone wins,’ ” he added.
EIA’s Falter noted that a Feb. 18 explosion at a refinery in Big Spring, Texas, likely had played a role in the recent increase in oil prices.
The explosion “didn’t have a physical effect on fuel supplies because … [the plant involved] was tiny — producing just 70,000 barrels a day,” Falter said. “It did have a psychological effect, however, and reminded people that last year, a series of planned and unplanned refinery shutdowns did cause a shortage in fuel supplies.”
She added that Venezuela’s threat to cut crude exports to the United States in a dispute with ExxonMobil contributed to the price rise.
The price of diesel also was rising as demand for heating oil was peaking.
“The price of heating oil acts as a kind of floor for diesel, because if diesel falls below heating oil, people can substitute diesel in their oil furnaces,” Falter said.
Residential heating oil sold for an average of $3.396 a gallon the week of Feb. 18, up 94.3 cents from a year earlier, according to the Energy Information Administration.
Stocks of distillates, from which heating oil, diesel and jet fuel are derived, fell by 4.5 million barrels from a year ago, DOE said.
