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The U.S. average retail price of diesel slumped 3.7 cents to $2.814 per gallon, the Department of Energy reported March 9, while oil tumbled on reports major suppliers would increase production despite withering demand as the COVID-19 virus was deemed a pandemic throughout much of the globe.
Trucking’s main fuel costs 26.5 cents less than it did a year ago, according to DOE.
All regional diesel prices fell, the most being 5 cents per gallon in the Gulf Coast region.
And, the U.S. average price of a gallon of gasoline dropped 4.8 cents to $2.375 per gallon, according to DOE’s Energy Information Administration. That’s 9.6 cents less than a year earlier. Average gasoline prices fell in all regions, including the most, 6.7 cents, in the Midwest, where it was $2.233.
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West Texas Intermediate crude futures on the New York Mercantile Exchange closed at $31.13 on March 9 compared with $46.75 per barrel March 2.
WTI’s 24.6% drop, compared with the previous close of $41.28 on March 6, was the most since the era of Desert Storm and the Gulf War.
One oil analyst said bankruptcies at small independent oil producers are likely to ramp up if oil prices remain at these levels, or lower, for two or three months.
“Then you’ll see the big companies pick up acreage for fracking for pennies on the dollar,” Denton Cinquegrana, chief oil analyst at Oil Price Information Service, told Transport Topics.
Cinquegrana said it was likely oil could fall into the $20 range as Saudi Arabia “unleashes just a wave of production. Russia, they are going to boost their production as well. That’s the real battle.”
The two producing countries are part of OPEC+, which could not come to an agreement on cuts in production levels earlier in March.
As for fuel prices, Cinquegrana said, “This is the crisis that is dropping all boats. I would expect prices to be lower for gasoline and diesel. But at the same time what does demand look like?”
A fleet executive said lower fuel prices usually mean consumers have more money in their pocket and can spend more, and that generates more freight. But, probably not now, with aggressive social distancing taking hold.
“We are kind of in a weird spot right now economically, where, typically, low fuel prices would be beneficial for us because the consumer would have more money in their pocket and buy more things that we could ship and haul. But throw the coronavirus in there, and I’m not sure how that will affect the industry or the economy,” said Chase Adkins, corporate vice president at Sharp Transport Inc.
Ethridge, Tenn.-based Sharp is a 41-year-old over-the-road and dedicated carrier primarily running dry vans. It runs 130 trucks, including 105 company-owned and 25 with owner-operators.
“The situation we are witnessing today seems to have no equal in oil market history,” International Energy Agency Executive Director Fatih Birol said. “A combination of a massive supply overhang and a significant demand shock at the same time.”
IEA forecast oil demand is expected to fall year-over-year for the first time since 2009, dropping by 90,000 barrels a day.
Additionally, another fleet executive said the continued national rollout of 5G wireless networks and its potential for better route optimization would benefit fuel efficiency. But he added that 5G prompts other concerns that must be addressed.
“Avoiding and/or routing around traffic congestion utilizing live traffic conditions and real-time vehicle monitors during our P&D operation has the potential for a 5% reduction in fuel use. At 6.5 mpg, this would result in significant savings while reducing our carbon footprint. In addition, this could also provide more productive driving hours, increasing our stops per hour,” John Coleman, chief information officer at A. Duie Pyle, told Transport Topics.
The West Chester, Pa.-based diversified less-than-truckload carrier uses 1 million gallons of diesel each month. It operates about 2,800 Class 8 tractors.
Coleman also said 5G represents another attack vector that bad actors could expose and government and businesses will have to defend — requiring more cybersecurity expertise and bringing added expense for all end users.
Financial analysts at one bank are monitoring the Korean economy for “useful clues” on how other major economies would be impacted by COVID-19.
“South Korea reports diverse and rich economic data that allow us to examine how certain sectors performed as the number of cases grew from zero to several thousand,” Wells Fargo wrote in a recent report.
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