Diesel Price Rises 0.4¢ in First Uptick of 2015

This story appears in the Feb. 16 print edition of Transport Topics.

Diesel’s national retail average price rose 0.4 cent to $2.835 a gallon, the first increase since November, while the gasoline price jumped 12.3 cents to $2.191, the Department of Energy reported.

Diesel increased for only the second time in seven months and has dropped more than $1 since June. Prior to last week’s increase, it was at its lowest level in almost five years.

Despite the uptick, diesel is $1.142 below its year-ago level, while the gasoline surge left the motor fuel at a five-week high, though $1.12 below the corresponding week last year, DOE said after its Feb. 9 survey of fueling stations.

An analyst with DOE’s Energy Information Administration said diesel and crude prices were starting to plateau.

“It looks like we have hit a bottom in the near-term,” said Sean Hill, an EIA analyst.

“Prices are more flat than trending down. That’s because this winter has been relatively mild, and we haven’t seen the bump in diesel prices like we did last year,” he said.

In 2014, the national average rose 14 cents in late January and February to more than $4 a gallon.

Earlier this month, UPS Inc. and FedEx Corp., ranked No. 1 and 2 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada, announced they were raising some of their fuel surcharge rates.

UPS, which adjusts its surcharges monthly, announced Feb. 2 it increased the level for its Ground and Air International units by 0.5% or less.

When prices were going down, the Ground surcharge remained constant, while the Air and International surcharge decreased to 5% from 7%,” UPS spokesman Andy McGowan said.

UPS Chief Financial Officer Kurt Kuehn said in the company’s Feb. 3 earnings call that “UPS Freight will be challenged by the decline in fuel surcharge revenue as it isn’t fully compensatory at the current low fuel prices.”

FedEx announced Feb. 2 it was lowering its Express surcharge to 3.5% from 4.5% but boosting its FedEx Ground rate to 6% from 5.5%.

“While [the Express surcharge] did go down month-over-month, that was because of a steep decline in the price of fuel,” said Rob Martinez, CEO of San Diego-based Shipware, which provides consulting services to parcel shippers.

FedEx CFO Alan Graf said in a conference call in December that “fuel surcharges for Express and Ground incorporate a timing lag of approximately six weeks to eight weeks before they are adjusted for changes in fuel prices.”

FedEx Freight, the company’s less-than-truckload unit, changes its surcharges weekly, spokesman Jess Bunn said. He added that last week’s 22.8% fuel surcharge, based on DOE’s weekly diesel average, was unchanged from the previous week.

Meanwhile, USA Truck, No. 50 on the TT100 for-hire list, has been able to avoid fuel surcharges despite declining prices, CEO John Simone said in a Feb. 11 interview.

“The challenge is whenever there’s a rapid change in price in either direction, it either creates positive or negative impact,” he said.

If prices are moving lower gradually, the surcharges adjust on a weekly basis, but if they are coming down a steeper trajectory, that benefits carriers, he told TT.

But when prices are rising sharply, that benefits shippers, while carriers “feel the price at the pump before the fuel surcharge increases,” Simone said.

When diesel prices were falling more sharply in the fourth quarter, about half of USA Truck’s fuel-price benefits came from the lower prices, and the other half from its own fuel-economy efforts, Simone said.

Those included installing auxiliary power units across its fleet to cut idle time and making sure the parameters on its more-than 2,000 trucks were set for maximum fuel efficiency.

“We brought all of our tractors back through the shop in 2014 and reflashed all of their electronic control modules to be sure they were set for optimal fuel performance,” he said.

USA Truck also added side skirts on its trailers and uses onboard technology to manage idle time and driver habits.

The company’s fuel-efficiency department “communicates daily with drivers and notes when there are anomalies in fuel performance,” he added.

Also last week, EIA lowered its 2015 price forecast for diesel by 2 cents to $2.83 a gallon but raised its crude-oil price forecast slightly.

Trucking’s main fuel will slide into the $2.70s from March through August before rising later in the year, EIA said in its short-term energy outlook.