Diesel Gains 5.3¢ to $4.157; Price Is Highest Since August ’08

This story appears in the Feb. 25 print edition of Transport Topics.

U.S. retail diesel prices hit their highest level in 4½ years last week after jumping 5.3 cents a gallon to $4.157, the Department of Energy reported.

Trucking’s main fuel has now increased by 26.3 cents a gallon over the past five weeks, DOE’s Energy Information Administration said after its Feb. 18 survey of fueling stations.

The latest time the diesel average was higher was Aug. 18, 2008, when it was $4.207 and coming down from the record price of $4.764 that July.

The retail gasoline average also leapt by 13.6 cents a gallon to $3.747, the ninth straight weekly increase, DOE reported. While the cumulative jump has added 49.3 cents to the price of the average gallon, gas is still below its six-month high of $3.878 on Sept. 17.

A year ago the averages for the two fuels stood at $3.96 for diesel and $3.591 for gasoline.

Analysts attributed the diesel and gasoline spikes largely to seasonal U.S. refinery maintenance.

“This happens every year at this time of year, although this time it is a little earlier,” Denton Cinquegrana, U.S. refined products analyst for the Oil Price Information Service, said of the price spikes.

“There’s some hefty first-quarter maintenance going on this year that was deferred from the fourth quarter after Superstorm Sandy and the West Coast gas-price spike,” Cinquegrana said, referring to two events from late October. Much of the late-winter refinery repair work is done to switch production to summer-grade gasoline from the winter blend, he said.

Truckers said the price spike means carriers must continue with vigorous efforts to maximize miles per gallon and stand squarely behind fuel surcharges, as failure to recoup costs could lead to bankruptcy.

“We need fairly logical pricing. We’ve had to say ‘no’ and turn down a lot of business lately,” said Michael D. Moran, vice president of Moran Transportation & Distribution in Elk Grove Village, Ill.

Less-than-truckload carriers such as Moran T&D usually have labor as their largest cost, but Moran said fuel now tops the list for his family’s business.

His company does a lot of transporting retail and consumer goods, and he said he has already noticed declines in volumes that need to be hauled as gasoline and diesel prices have risen.

“It happens almost instantaneously, in just a few days or a week,” Moran said of declining volumes.

Beyond pricing appropriately for his services, Moran said, he and his managers are constantly examining ways to improve mileage, whether truck innovations, driver training, and tractor and trailer fairings.

“With the current stagnant freight volume and rising fuel prices, I see one direction for small- to medium-size carriers,” said Travis Nelson, owner of X-Treme Trucking, Green Bay, Wis. “Either stay tough on the fuel surcharge, or you will be bankrupt.”

Nelson uses about 50,000 gallons of diesel per quarter for his fleet of 10 trucks that do flatbed, heavy-haul and specialized work. He said he’s seen prices jump by 20 cents a gallon, even as some spot prices for certain lanes have declined.

Nelson said he monitors tire pressure, governs his speeds, optimizes routes with software and pays a fuel bonus, but he also knows his costs and must stand by his rates.

“If we are not securing a fuel surcharge, we will fail,” he said.

Meanwhile, EIA petroleum analyst Timothy Hess said that “refineries were running at high utilization rates for quite a long time in late 2012.”

As a result, maintenance needs are heavier this spring, and lower supplies of diesel and gasoline are leaving the refineries — while crude prices have been rising from early December through the start of February.

The New York Mercantile Exchange high close for this year was $97.94 a barrel on Jan. 30. Since then it has dipped to a closing price of $92.84 on Feb. 21. In London, more expensive Brent crude hit a high of $118.90 a barrel on Feb. 8 but dropped to a close of $113.53 on Feb. 21.

A year ago, crude approached $110 a barrel in New York and topped $125 in London.

The Nymex heating oil contract, a measure of diesel price to come, also peaked on Feb. 8 at $3.238 a gallon and has since dipped to $3.096 on Feb. 21.