Diesel Average Jumps to $3 a Gallon

This story appears in the Oct. 11 print edition of Transport Topics.

The average cost of U.S. retail diesel climbed 4.9 cents last week to $3 a gallon, the first time trucking’s main fuel has reached that level in more than four months, the Department of Energy reported.

At the same time, the gasoline average rose 3.8 cents to $2.732 a gallon, DOE reported after its Oct. 4 survey of fueling stations.

“All year long, retail fuel costs have been driven mainly by short-term swings in crude prices. No other factors have really had anything to do with it,” Tancred Lidderdale, senior economist at DOE’s Energy Information Administration, told Transport Topics.

On the New York Mercantile Exchange, crude oil closed Oct. 7 at $81.67 a barrel. It has been climbing steadily since closing on Sept. 21 at $73.52 a barrel, according to Bloomberg News.

“We have a general formula that every dollar increase in the cost of crude pushes up retail fuel prices by 2 cents to 2.4 cents a gallon . . . although they’ve risen just about

5 cents a gallon so far,” Lidderdale explained. He said retail diesel and gasoline had the potential to rise up to 15 cents more.

The latest time the diesel average reached $3 a gallon was May 24, according to DOE figures. Diesel fluctuated between $2.90 and $2.99 a gallon between May 31 and Sept. 27, DOE data showed.

Gasoline also has been selling within a narrow but lower range, bouncing up and down between $2.68 and $2.78 a gallon between May 24 and Oct. 4.

Diesel was 41.8 cents a gallon more expensive than the comparable week last year, while gasoline was 26.4 cents higher, DOE said.

Two fleet executives said they were learning to live with the situation where good economic news, which should bring more freight demand, would also lead to higher diesel prices.

“When the economy expands, the rising diesel price eats up that opportunity to make a corresponding pro-fit increase from freight,” Sten Sohlberg, president of Jones Bros. Trucking, Missoula, Mont., told TT. “That’s why we have a constant, day-to-day battle to offset the increase in diesel and continue to stay profitable, whether by fuel surcharges or increased freight rates. It’s different with every client.”

Sohlberg said increasing the company’s revenue was only a partial solution.

“The other side of that equation is saving fuel,” he added. “We have a fuel bonus program for our drivers, but it’s tied to the base price of fuel, as well as their fuel savings monthly.”

Sohlberg explained that if the company’s drivers achieve “a good fuel mileage and price of fuel is higher, they will be rewarded more than if diesel prices were dropping.”

Jones Bros. runs 50 tractors and

50 flatbed trailers nationally and throughout Canada, Sohlberg said.

“We look at fuel prices on a daily basis, but we have our own bulk storage and try to buy ahead to get the best rates,” Al Nunes, president of AC Trucking, Manteca, Calif., told TT. “We don’t buy much fuel on the road.”

Nunes added that his company does “all the things that need to be done” beyond bulk buying to cut fuel costs.

“We’re taking advantage of the technology of onboard electronic equipment to monitor fuel use by each driver,” Nunes said. “We post the results for individual drivers twice a month at our headquarters. We have a bonus program in effect for drivers, but we also want them to compare themselves to other drivers and get better.”

The truck is first checked for mechanical problems for drivers who consistently get low fuel scores, he said. If the problem is the driver, the company retrains him, Nunes added.

He said the bonus program and posting of driver results cut fuel use, but he declined to put a figure to it.

Nunes said that the company also decided to convert its 25-truck fleet to automated manual transmissions during its normal turnover of trucks.

“We’ve been seeing a 3% to 4% increase in fuel savings from trucks we’ve tested with automated manuals,” Nunes said.