Diesel Jumps 6.6¢ to $3.066 a Gallon

This story appears in the Oct. 18 print edition of Transport Topics.

Fuel prices surged for a second week as the U.S. retail diesel average hit $3.066 a gallon, 6.6 cents higher than a week ago, the Department of Energy reported.

The retail gasoline average shot up even higher, rising 8.7 cents to $2.819 a gallon, the largest one-week gain in almost a year, DOE reported Oct. 12 after its regular survey of fueling stations.

“The jump in crude is pretty much the story behind the rise in retail fuel prices,” Neil Gamson, an economist at DOE’s Energy Information Administration, told Transport Topics. “It’s rising because there’s a worldwide sentiment that the global recovery will continue to pick up strength, and there will be growing need for diesel to move more products by truck.”

Crude oil, which rose as high as $83.23 a barrel on the New York Mercantile Exchange on Oct. 6, closed at $82.69 on Oct. 14. That was more than $9 a barrel above its closing price of $73.52 a barrel on Sept. 21, Bloomberg News reported.

The diesel average has now increased 11.5 cents over the past two weeks, and is now 46.6 cents a gallon more than the comparable week in 2009. Gasoline, which is up 12.5 cents over the two weeks, is 33 cents more expensive than a year earlier.

American Trucking Associations estimates the trucking industry burns 752 million gallons of diesel and 285 million gallons of gasoline each week, meaning that last week’s increases resulted in almost $50 million in additional diesel costs and almost $25 million more spent on gas each week.

“This big price increase has ramped up our sense of urgency to economize in fuel in every way possible,” said H. R. “Chip” Matthews, president of a regional less-than-truckload carrier, Benton Express Inc., Atlanta. “We’ve all noticed the steeply rising price, we’re all paying it and we all don’t like it.”

Matthews said Benton Express, which runs about 380 tractors and 820 trailers, collects a fuel surcharge on nearly all its loads.

“But the fuel surcharge is always a week late, and since we don’t get paid anyway for 35 days, we’re running a negative cash flow at even a higher rate when prices jump like this,” Matthews said.

He said fleet managers are trying even harder to direct trucks that are not fully loaded to pick up smaller loads at points along the route to their ultimate destinations, to avoid having to send out another truck.

Hal Miller, executive vice president of Miller Transporters Inc., Jackson, Miss., told Transport Topics that when pump prices spike, “the most important thing we do is to pay extra attention to fuel surcharges to make sure that we get properly compensated.”

Bob Ramorino, president of Road Star Trucking Inc., Hayward, Calif., said that he checks fuel prices daily.

“That’s because we have our own fuel storage facility, and I’ve been seeing prices fluctuating wildly, by 7 to 9 cents a day, so I’m aware that something crazy is going on,” he said.

“We have some sort of fuel surcharge on practically all of our loads, but rapidly rising prices hurt us on our national accounts, which have forced us to accept ‘shipping’ surcharges recently,” Ramorino said. “Those are based on national diesel price averages, and they’re always lower than in California.”

EIA’s monthly Short Term Energy Outlook, released Oct. 13, projected that diesel will sell for an average of $3.024 a gallon in November and $3.01 in December, before climbing steadily to hit its average high for 2011 in November at $3.229 a gallon.

“In fact, it’s pretty certain that retail diesel prices over the next month or two will be even higher than we projected in the report,” EIA’s Gamson said. “Crude has climbed even higher in the few weeks than we expected, by about $10 a barrel overall since it started rising Sept. 21.”

EIA projected that gasoline will sell for an average price in 2011 of $2.92 a gallon, 18 cents higher than its expected average price this year.