U.S. Diesel Fuel Price Jumps 10.2¢ to Top $4 a Gallon

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

The average price for a gallon of U.S. retail diesel rose above $4 last week for the first time in two-and-a-half years and will likely remain there through 2012, according to the U.S. Department of Energy.

Diesel rose 10.2 cents during the week to $4.078 a gallon, DOE said after its April 11 survey of fueling stations. Since Nov. 29, trucking’s main fuel has risen 18 out of 19 weeks for a total of 91.6 cents. The price is now the highest since Sept. 1, 2008, when it was $4.121.

Diesel is now also $1 a gallon more expensive than the same week last year.

DOE also reported that the retail gasoline price average shot up 10.7 cents to $3.791 a gallon last week. Gasoline is at its highest since Sept. 15, 2008, when it sold for $3.835.

Gasoline, which has risen 17 out of the past 19 weeks, is 93.3 cents higher than the same week last year, DOE data showed.

“The increase of crude prices has been the main driver for retail fuel increases . . .,” Neil Gamson, economist at DOE’s Energy Information Administration, told Transport Topics.

Crude oil hit $112.79 a barrel on the New York Mercantile Exchange April 8, its highest since Sept. 22, 2008, when it was $120.92, Bloomberg News reported. It closed at $108.11 on April 14.

EIA, in its latest “Short-Term Energy Outlook,” issued April 12, increased its forecast for 2011’s third-quarter diesel average to $4.10 a gallon, 23 cents above its March estimate, and by 29 cents in the fourth quarter to $4.05.

EIA also raised its estimate of diesel’s 2012 average price to $4.07, up from its March forecast of $3.82.

Gasoline will stay above $3.80 through the summer driving season, dip to $3.74 in the fourth quarter but then average $3.80 throughout 2012, EIA predicted.

Truckers coped with the surge as best they could.

“The simple answer is that diesel’s quick jump to over $4 a gallon has been painful,” Dennis Morgan, chief operating officer of Cowan Systems, Baltimore, told TT. “The entire industry is struggling right now. When fuel goes up this fast, it eats up your cash really quickly.”

Cowan Systems, which operates 750 of its own tractors and 2,900 trailers while working with 400 owner-operators, ranks No. 86 on Transport Topics Top 100 for-hire carriers in the United States and Canada.

“Fleets recover only about 80% to 85% of their fuel costs through surcharges, and it’s worse for our company, since we do a lot of short-runs of less than 100 miles without any surcharge at all,” Morgan said.

“In addition, I have to pay for fuel within one or two days, but then, we have to wait 45 to 60 days for payment,” he added. “The more fuel you buy, the greater are your upfront costs, without any increase in profits.”

He said it was impossible to renegotiate shipping contracts.

“I’d like to use a fuel optimization program, but with our short routes, it’s not practical,” Morgan said.

David Freymiller, president of Freymiller Trucking Inc., Oklahoma City, turned to fuel optimization during diesel’s last rapid run-up in 2008.

“Optimization software has helped us a lot, saving about 5 cents a gallon when we put it in, and now saving several hundred dollars a month per truck,” Freymiller told TT.

Freymiller operates 200 of its own tractors and 400 trailers, with 100 owner-operators, working throughout the United States.

“Once you put in the trip and load information, the program tells the driver where to stop and when,” he explained. “It takes advantage of your discounts at the right fuel spots, rather than letting the driver pick the truck stop he wants.”

Freymiller said that drivers initially balked at the program, believing it would make them stop numerous times for short fills on one trip.

“It doesn’t work that way at all,” Freymiller said. “If a truck is nearing empty, it might tell a driver to put in 50 gallons at one stop in order to get to a station where it’s the cheapest, then fill up. That’s all.”