Diesel Average Increases 3.1¢ to $3.904 as Cold Weather Lifts Seasonal Demand

This story appears in the Feb. 3 print edition of Transport Topics.

Diesel’s pump price rose for the first time in three weeks, as ongoing blasts of cold weather resulted in increases in the Northeast and Midwest regions that paced the national price hikes.

Trucking’s primary fuel increased 3.1 cents to $3.904 a gallon, the Department of Energy reported Jan. 27, led by the East Coast region’s price, which spiked a nickel to almost $4 a gallon.

The national increase followed a cumulative 3.7-cent decline in the previous two weeks. Despite the upturn, diesel was 2.3 cents below the same week last year.

Gasoline, meanwhile, dipped 0.1 cent to $3.295, its third straight downturn. The motor fuel, which slid 3.7 cents in those declines, was 6.2 cents below the corresponding week a year ago.

Diesel’s bounce to more than $3.90 was just the third time since September it has topped that level, along with the last week of 2013 and first week this year.

A DOE analyst last week said the continuing cold weather was the main driver of the higher prices, with the gains highest in the East Coast and Midwest regions — areas in which heating oil is widely used in the winter and often boosts diesel’s price, as both are distillate fuels.

“Higher diesel prices are almost entirely driven by the weather and seasonal demand,” said Sean Hill, an analyst in DOE’s Energy Information Administration.

“We’ve had considerably colder weather than expected, and distillate stocks are dropping and tightening up the market for the first time in a while,” Hill told Transport Topics on Jan. 29.

EIA reported earlier that day that distillate supplies fell by 4.6 million barrels for the week ended Jan. 24. That was more than twice the 2.1 million barrel decline forecast by analysts, Bloomberg News reported.

Gasoline supplies also fell 800,000 barrels for the week, a smaller downturn than the 1.4 million-barrel decline that was forecast. Crude oil inventories jumped 6.4 million barrels, more than twice the increase that was forecast.

Diesel’s average price rose 5 cents on the East Coast to $3.996 — topping the West Coast’s $3.979 as the highest overall price and posting a bigger gain than the West’s 1.3-cent increase.

The New England and Central Atlantic subregions — areas in which heating oil is widely used in the winter months — spiked 5.3 cents and 8.4 cents, respectively, to $4.17 and $4.14, the highest overall prices that are broken out by DOE.

The Midwest region also posted a larger gain than the national increase, climbing 4.4 cents to $3.874 a gallon.

With the serious cold blast that hit much of the country last week, one Midwest trucking executive said that the extreme weather was hitting carriers’ profits.

“Making money in the trucking business is very hard to do in the winter,” said John Daniels, president of Long Haul Trucking in Albertville, Minn.

“It was 24 degrees below zero this morning,” he told TT on Jan. 28. “We’ve had some problems with [diesel exhaust fluid] freezing up. It’s definitely an issue keeping trucks on the road. We’ve got owner-operators that normally get around 6 miles per gallon getting 4.3 [mpg] in this type of weather. It’s costing them a lot.”

Long Haul, a truckload carrier, has a 300-truck fleet, with about 100 company drivers and 200 owner-operators. It primarily runs aluminum and building products in the Midwest and Northeast.

“We can pass on higher fuel prices through fuel surcharges, but costs increase with the cold weather,” Daniels said. “You can’t idle them as much, and they don’t get as good mileage.”

“In whiteout conditions, they can’t drive normal speeds,” he added. “The other day, there were 40 trucks in an accident on I-94. Even if you’re not involved, you’re stuck in traffic.”

Crude oil prices, meanwhile, rose to their highest level this year, rising almost $1 on Jan. 30 to finish the New York Mercantile Exchange trading day at $98.23 a barrel.

The gain was largely due to positive economic reports last week, including one that showed a fourth-quarter GDP growth rate of 3.2%, Bloomberg reported.

DOE’s Hill noted that while refinery outputs rose 1.7% for the week ended Jan. 24 to 88.2%, with a 15.4 million

barrels-per-day rate, that was lower than December’s near-record refinery run rate of more than 92% utilization and more than 16 million bbd of output.

Diesel prices also have pushed higher in Canada this month, with the cold weather boosting prices in Ontario to the highest level in six years, according to the Ontario Trucking Association.

The average rack price across the province broke the 100 Canadian cents-per-liter mark before taxes, averaging 101.1 cents, OTA reported Jan. 28.

That price — equal to about US$3.89 a gallon — was the highest since 2008, when fuel prices hit an all-time high, the trucking group said.