Diesel Prices Drop Another 5.3¢ to $4.004 per Gallon

This story appears in the May 21 print edition of Transport Topics.

Retail diesel prices retreated another 5.3 cents to $4.004 a gallon last week, the Department of Energy reported, as crude oil prices sank to their lowest levels of the year.

Last week marked the fifth consecutive decline for diesel, and left trucking’s main fuel 5.7 cents below where it was a year ago. However, it was also the 12th straight week that the diesel average has been above $4 a gallon, something not seen since 2008.

DOE also reported that retail gasoline prices declined 3.6 cents to $3.754 a gallon, continuing a downward trend that began six weeks ago after gasoline peaked for the year at $3.941 on April 2.

Crude oil prices that directly affect pump prices have “come down quite a bit in the last couple weeks,” said Sander Cohan, fuel analyst at Energy Security Analysis Inc. “That will trickle through to fuel prices and the speed with which it does depends on crude stocks, wholesalers, the whole supply chain of diesel production.”

Oil analysts said falling crude oil prices reflected fears that Greece would default on its debt or exit the Euro Zone and the news that oil supplies increased, while demand did not.

DOE reported May 16 that U.S. oil stockpiles had grown 2.13 million barrels, the largest weekly jump since 1990. The news sent crude prices on the New York Mercantile Exchange tumbling — to $92.81 a barrel, compared with the highest price for the year of $109.77 on Feb. 24.

The following day, crude closed even lower, at $92.56 a barrel on May 17 on the New York Mercantile Exchange.

There is, however, “significant variance between parts of the country” when it comes to diesel prices, said Tom Kloza, chief analyst for the Oil Price Information Service, who attributed the differences to regional refinery and supply issues.

For example, in California diesel averaged $4.349 a gallon last week, DOE said, while in the Midwest, a gallon was 45 cents less at $3.897.

Midwest truckers, though, don’t think of their fuel as inexpensive.

“We haven’t felt that, I guess,” said a laughing Daniel Breckenridge, who owns two firms in Wenona, Ill., — B&B Trucking Inc., which hauls ethanol, and Breckenridge Trucking, a small dump truck fleet.

To help cut costs on his 20 trucks, Breckenridge recently began outfitting them with systems that monitor driver habits.

“We just implemented this in the last 30 days on a few trucks, but we’re implementing it on all of the trucks here over the next 30 to 60 days,” Breckenridge said.

“We look at performance and miles per hour and idle time,” he said. “There’s no other way to cut the cost on the consumption side.”

Midwest prices are lower because “comparatively cheap crude” comes from Canada and North Dakota but California and the West Coast have two issues that make fuel most costly there, Cohan said.

“One is that [California] has a very specific diesel specification that really only applies [there] and so [the region] is blocked off from the rest of the country not only by the Rockies, but also [in California by] its own boutique brand of diesel.”

Only two refineries produce the exceptionally low sulfur diesel that California requires, said Cohan.

California’s requirements make it a “fuel island,” said Scott Blivens, president of the California Trucking Association.

Blivens owns Mountain Valley Express Inc., a less-than-truckload fleet of 180 units in Manteca, Calif.

“You can run in the state all day long [with fuel bought in other states], there’s no restriction on the out-of-state fuel running in California,” Blivens said. “Ninety percent of our operation is intra California, so, 90% of our fuel costs have been in California,” he said.

“Our concern is that our competitors, truckers from out of state, can buy their fuel . . . at a cheaper price in our boarding states of Arizona and Nevada, run in the state without ever fueling up here, and then run right back out on that lower cost of fuel,” Blivens said.

The carrier runs dry vans and double trailers, Blivens said, and 20-plus years ago found a way to cut its fuel cost.

“When you’re pulling a van down the highway, obviously you’re pulling a wind block with you and we installed aero dynamic air fairings on the tops of our cabs,” he said. “And that improved our miles per gallon to a fleet average of 7.2.”

In Willits, Calif., Phil Schuster, who runs Shuster’s Transportation Inc., said fuel is an endless concern.

“First thing I do in the morning is turn on the computer and check the [crude] oil price,” Schuster said. Then he checks the diesel prices, trying to buy when prices are moving down. He has his own tanks.

“I spend at least an hour and a half a day studying it,” Schuster said of fuel prices. “It’s over 30% of my costs,” he said.