Gasoline Price Soars 16.2¢

This story appears in the May 18 print edition of Transport Topics.

The average price of retail gasoline soared last week, jumping 16.2 cents a gallon to a U.S. average of $2.24, leapfrogging diesel, which rose 3.1 cents to $2.216. Gasoline prices exceeded diesel for the first time in nearly two years.

According to Department of Energy data, gasoline most recently sold for more than diesel on July 23, 2007, when the gasoline price average was $2.958 and diesel sold for $2.889.

The widest gap between the two fuels since 2007 occurred on Dec. 29, when the diesel average was $2.327 a gallon, 81.6 cents more than gasoline.

Douglas MacIntyre, an analyst with DOE’s Energy Information Administration, said a combination of seasonal driving patterns and the weak economy accounted for gasoline’s surge.

“Demand for diesel has fallen a lot more dramatically because of weak freight demand, while gasoline demand is roughly the same as a year ago at the higher summertime levels,” MacIntyre told Transport Topics. “If you include heating oil and diesel together, demand is down more than 10% from a year ago, so that weak demand is keeping diesel prices from going even higher.

John Felmy, chief economist of the American Petroleum Institute in Washington, D.C., agreed. “It’s more expensive to manufacture gasoline than diesel, and with gasoline demand up for the summer season . . . that pushed gas past diesel,” he told TT.

The one-week, 13.1-cent difference in price movement between gasoline and diesel was the largest since last Sept. 15, when gasoline rose 18.7 cents over the previous week because investors feared Hurricane Ike had damaged Texas Gulf Coast oil re-fineries, while diesel dropped 3.6 cents.

American Trucking Associations estimates that the U.S. trucking industry burns 752 million gallons of diesel weekly and 285 million gallons of gasoline.

At those rates, truckers paid $23.3 million more for diesel and $46.2 million more for gasoline than the prior week.

Despite the increase, diesel was still selling for $2.115 a gallon less than it did a year ago, and gasoline was selling for $1.482 less. Nonetheless, truckers were feeling the effects of diesel’s increases over the past two months.

“Diesel’s sneaking back up again, and it’s starting to hurt a little more,” Phil Smith, president of Smith Trucking Inc., Worthington, Minn., told TT.

The company runs 90 tractors and 125 refrigerated trailers to all of the contiguous 48 states.

When fuel prices soared, Smith reduced the top speed of his trucks to 65 miles per hour and worked out a discount agreement with a truck stop operator.

“Not having a fuel depot, we buy 99% of our fuel at Flying J’s now, and it’s saved us a lot of money,” Smith said.

“The slower speed has caused much better fuel mileage and so many fewer accidents, that we’ll never bring the governors back up,” Smith said.

Richard Meyers, manager of for-hire Ralph Meyers Trucking Inc. in West Olive, Mich., was not as worried.

“Yes, fuel has become more of a concern but not a major concern, now that it’s gone up a little, but nothing like when it was $4.50 a gallon,” Meyers told TT.

The company has 15 tractors and 30 trailers, all refrigerated units, running in about 30 states.

The company always has bought wholesale diesel by the tanker load for a fueling depot at its headquarters, Meyers said, starting long before the diesel price run-up.

EIA’s MacIntyre said the increase in crude oil prices in recent weeks was the underlying cause for the boost in both fuels.

“The price changes are reflecting a fairly large jump in crude oil prices, which were hovering around $50 a barrel at the end of April and have now climbed above $58,” MacIntyre said on May 12. “Gasoline hasn’t caught up percentagewise with crude, which means we’ll probably have even higher retail.”

Crude oil closed at $58.85 on May 13 on the New York Mercantile Exchange and still was trading above $58 on May 14, according to Bloomberg News.

EIA said in its Short-Term Energy Outlook, issued May 12, that diesel will be more expensive than gasoline this year, but not by much.

“The annual average regular-grade gasoline retail price in 2009 is expected to be $2.12 per gallon, increasing to an average of $2.30 in 2010,” according to the EIA report.

“The annual average diesel fuel retail prices are expected to be $2.26 and $2.48 per gallon, respectively, in 2009 and 2010,” the report said.