By Sean McNally, Senior Reporter
This story appears in the Nov. 30 print edition of Transport Topics.
Retail diesel prices edged lower again last week for the third consecutive time, while gasoline prices rose, the Department of Energy reported.
Trucking’s primary fuel slipped 0.3 cent to $2.787 a gallon, bringing diesel’s total decline to 2.1 cents over the three weeks, as measured in DOE’s weekly review of filling stations.
At the same time, gasoline rose for the first time in three weeks, going up a penny to $2.639 a gallon.
Andrew Reed, an analyst with Energy Security Analysis Inc., Wakefield, Mass., told Transport Topics that plentiful supplies of diesel and other distillate fuels will keep prices low, even if the economy begins to improve.
“There’s such a high starting point for distillate stocks heading into the winter, even if we’re going to see some decreases in stocks . . . the big picture remains incredibly bearish” for diesel prices, Reed said Nov. 24. “Some people are talking about economic recovery increasing demand and diesel prices strengthening, but I don’t buy it. A slight improvement in demand isn’t going to increase diesel prices.”
The DOE and the American Petroleum Institute were scheduled to publish updates of the nation’s fuel supplies after press time, but in its Nov. 17 report, API said there was 36.9% more diesel fuel on hand than at this time last year.
Even with the recent declines, the price of both gasoline and diesel are above where they were a year ago — with a gallon of gasoline costing 74.7 cents more last week than it did at the corresponding time last year and diesel 12.3 cents higher. But both fuels are still well off their historic highs from early 2008.
Mike Hobby, a spokesman for Oak Harbor Freight Lines Inc., Auburn, Wash., the high but less-than-historic fuel prices were helping the company capture fuel surcharges from shippers to recoup their costs.
“Most of our customers have some kind of a graduated scale built into . . . [their contracts] so it’s an automatic thing,” he said, “and especially since we’re not at the high range where we’ve been in the past. We’re below those historical highs, so that’s always good.”
However, to further mitigate costs, Hobby said the less-than-truckload carrier continues to buy fuel in bulk for its terminals and is “trying to optimize our routes so we run less miles. That’s the ultimate goal of the whole thing, is to run fewer miles and use more efficient equipment.”
Hobby said Oak Harbor has not done much to modify its existing equipment because of lower freight volumes but has “pulled older equipment that’s reached the end of its lease” and is retiring some equipment earlier than usual “because we have no need for it.”
A&B Freight Lines Inc., a regional LTL based in Rockford, Ill., also is seeing weaker volumes but still must run as many miles, keeping its fuel consumption relatively flat.
“We haven’t seen volumes increase,” said Bruce Shelton, manager of marketing and traffic for A&B, “but we have as many pickups, but they are small pickups, and minis kill the trucking industry.”
The price of fuel made both incremental movements as prices of crude oil flirted with $80 a barrel but ultimately retreated below that level.
“Price rises will be constrained because supply is ample and refineries are cutting runs significantly,” Phil Flynn, vice president of research at PFGBest in Chicago, told Bloomberg News. “There will be a lot of resistance as we near $80.”
The price of a barrel of oil closed at $76.02 on Nov. 24.
John Kilduff, partner at Round Earth Capital, a hedge fund that focuses on food and energy commodity investments, told Bloomberg News that the market has “priced in about as much hopefulness about the economy as possible, [but] once we get close to $80, the reality of the present situation pulls prices lower.”
