April 21, 2008 1:45 AM, EDT

Diesel Average Tops $4 for First Time

Gasoline, Crude Oil Also Reach New Records

By Frederick Kiel, Staff Reporter
This story appears in the April 21 print edition of Transport Topics.
Retail diesel surged 10.4 cents to $4.059 a gallon, the first time the national average price has crossed above $4, the Department of Energy reported. Also last week, both the U.S. gasoline average and crude oil prices set new records.
John Felmy, chief economist at the American Petroleum Institute, said strong worldwide demand for oil and fuel continued to be the main reasons behind the records.
Last week’s diesel increase left commercial trucking’s main fuel 75 cents higher than four months ago and $1.182 more expensive per gallon than the same week in 2007, DOE said after its April 14 survey of fueling stations. For a trucker making a 200-gallon purchase, that equates to an additional $236.40.
Mary Welge, senior analyst at the Oil Price Information Service, told Transport Topics there likely will not be relief anytime soon.
“Diesel seems to have settled . . . above $4 a gallon, which means it may stay there a while,” she said.
DOE also said the average for retail gasoline rose 5.7 cents to its new national average record of $3.389 a gallon, leaving it 51.3 cents a gallon higher than a year earlier.
American Trucking Associations estimates the industry burns 730 million gallons of diesel and 280 million gallons of gasoline weekly, which translates into more than $1 billion in added fuel expenses than in the same week in 2007.
“Rising diesel prices have put a hurt on us.” Terry Klenske, president of Dalton Trucking Inc., Fontana, Calif., told TT. “We’ve got 20 to 40 trucks parked at any one time these days. It’s a combination of the construction slowdown and a lot of customers don’t want to pay us enough of a surcharge to make a job profitable.”
Dalton Trucking runs about 200 trucks, some reefers and others carrying sand and gravel for construction, all inside California.
“The jump to $4 has made a huge impact on our company,” Jeff Moore, controller of Roseville Motor Express Inc., Roseville, Ohio, told TT. The company has 30 trucks that run general freight in Ohio and surrounding states.
Moore said the company has halted the practice of adding or subtracting new fuel costs onto the most recent surcharge. He said increased price volatility caused the company to alter the surcharge more often, which caused customer confusion.
“What we do now is have a low standard base of fuel on every bill that never changes, say $2 a gallon, and then add the surcharge for that contract based on what diesel is doing then,” he said.
For larger clients who refuse to pay the surcharge, the company looks for incentives previously put into contracts that can be cut in order to pay for the diesel, Moore said.
Even major firms have been hit hard.
For J.B. Hunt Transport Services, the largest publicly traded truckload carrier, the cost of fuel and fuel taxes rose 28% to $134 million in the first quarter of 2008 compared with a year earlier. That contributed to a decline in profits.
As carriers struggle, truck stops are also feeling the pain, said Mindy Long, spokeswoman for NATSO. She said truckers have cut back on meals and other purchases, including delaying some nonemergency repairs. NATSO is an association that represents truck stops and travel plazas.
“Retailers are feeling the pinch because they have to keep prices as low as possible, so their profit margins have gone down in this price run-up,” Long said.
Meanwhile, crude oil rose as high as $115.54 a barrel on the New York Mercantile Exchange on April 17, its highest-ever price, Bloomberg News reported. A day earlier, it closed at a record $114.93. Oil prices are up about 80% from a year earlier.
“The price of the dollar, which has declined deeply in relation to many other currencies in the past year, has been one major factor in crude’s rise,” Laurie Falter, analyst at DOE’s Energy Information Administration, told TT. “Since crude is priced in dollars, many traders who normally didn’t consider oil have been buying crude as protection against further dollar declines.”
On April 16, the dollar sank as low as $1.5968 versus the euro, an all-time low.

Diesel Average Tops $4 for First Time

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