US Diesel Average Declines 4¢ to $2.031; Price Has Fallen 47.1¢ Over 12 Weeks
The U.S. retail diesel average price fell for the 12th consecutive week, dropping 4 cents a gallon to $2.031, less than 1 cent above the lowest price in the era of ultra-low-sulfur fuel, the Department of Energy reported.
Trucking’s main fuel is 80 cents a gallon cheaper than a year ago and has fallen 47.1 cents since Nov. 9, DOE said after its Feb. 1 survey of fueling stations. Diesel dropped in all regions of the United States last week, with four regions now reporting average prices under $2 a gallon.
The price last week also was 0.8 cent above the lowest level since DOE began reporting ULSD prices on Feb. 5, 2007. The previous year, the Environmental Protection Agency mandated that ULSD, with its lower sulfur content of 15 parts per million, compared with the previous standard of 500 ppm, was required as part of EPA’s tightened diesel engine emissions regulations.
Despite the falling diesel prices, managing fuel costs better was going to play a key role in corporate cost-cutting initiatives to achieve earnings targets for 2016, Jerry Moyes, founder, chairman and CEO of truckload carrier Swift Transportation, said in a recent earnings conference call.
“We’re going to be very aggressive in managing our fuel expense, looking very closely at where we purchase, both over the road and our bulk, analyzing our fuel optimization route and taking advantage of the improved fuel economy on new equipment,” Moyes said.
Swift, based in Phoenix, ranks No. 6 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
Lower prices are a boon especially for truckload fleets running older equipment, John Larkin, an analyst with Stifel, Nicolaus & Co., told TT in an e-mail. They also help larger less-than-truckload fleets, which have an advantage over smaller operations in fuel surcharges when freight volumes decline.
“At lower fuel prices, the older [truckload] fleets are less likely to be financially stressed as the disadvantage of running a 5 miles-per-gallon fleet is smaller as fuel prices drop,” Larkin said, but “. . . fuel-inefficient fleets may not survive the higher energy prices as most fuel surcharges don’t make them whole.”
LTL fleets determine a load factor that “theoretically” allows them to break even on fuel surcharges, he also said.
“Let’s say an LTL carrier picks 75% as his break-even load factor,” Larkin said. “Since the fuel surcharge is based on a percentage of the freight bill, say, 10%, the carrier would lose money at a system load factor of, say, 70% but make money on a system load factor of, say, 85%. Again, the big carriers have an advantage as they use their scale and marketing clout to drive higher load factors,” Larkin said.
DOE also reported the average retail price of regular gasoline fell to $1.822, down 3.4 cents from Jan. 25, and 24.6 cents from a year earlier. Gasoline has fallen for five consecutive weeks since it was $2.034 on Dec. 28, 2015.
The current national average is lowest price since January 2009. Gasoline was cheapest in the Gulf Coast region, dropping 3.8 cents to $1.59.
As for diesel, it “is going to keep dropping,” Denton Cinquegrana, an analyst with the Oil Price Information Service, told Transport Topics. “Fleets, in general, are paying under retail, so it’s good for the end-users.”
Diesel will drop below the price of gasoline this spring and summer, he added, “for the first time in many years.”
Meanwhile, on Feb. 2, crude oil futures closed on the New York Mercantile Exchange at $29.88, down $1.57 from $31.45 on Jan. 26.
Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI at the nation’s biggest storage site, rose by 747,000 barrels to 64.2 million last week, 24,000 barrels short of a record, Bloomberg News said.
The tank farm has a working capacity of 73 million barrels, EIA said.
“It’s debatable about just how much storage capacity is at Cushing,” Matt Sallee, who helps manage $13.5 billion in oil-related assets at Tortoise Capital Advisors in Leawood, Kansas, told Bloomberg News. “The challenge will come when refinery maintenance really picks up in mid-March.”
