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January 28, 2008 7:45 AM, EST

Diesel Price Average Falls 5.6¢ to $3.27

Analysts See Slide Continuing
By Frederick Kiel, Staff Reporter
This story appears in the Jan. 28 print edition of Transport Topics.

The U.S. national average retail diesel fuel price fell 5.6 cents a gallon last week to $3.27, while gasoline dipped 5.1 cents to $3.017, the Department of Energy said.
The previous week, the average retail diesel price fell 5 cents a gallon and gasoline slipped 4.1 cents, and analysts predicted further declines.
“We think that crude oil prices could fall into the low 80s soon,” Laurie Falter, an analyst at DOE’s Energy Information Administration, told Transport Topics. That means “diesel and gasoline can fall up to 25 cents a gallon more, max, by the end of February.”
Crude oil, which reached $100 a barrel at the end of December, traded at $89.20 at midday Jan. 24 at the New York Mercantile Exchange, Bloomberg News reported.
L.E. “Tripp” Dunman III, managing director of FCStone Trading’s fuel surcharge group, agreed with Falter.
“The futures contract price for wholesale heating oil, which closely corresponds to fuel prices, has fallen about 27 cents . . . in 20 days,” Dunman told TT. “Because of the lag time between wholesale and retail prices, there is still room for retail diesel and gasoline to drop further.”
Both Falter and Dunman attributed the drop in crude oil prices to concerns over weakness in the U.S. economy. Truckers, however, said the price drop brought little relief.
“A whole lot of shippers are trying to take advantage of weak freight demand to cut back on fuel surcharges and extra weight premiums,” John Rawls, vice president of Grayson Mitchell Inc., Emporia, Va., told TT.
“Even if diesel has dropped a bit, we’ve had to refuse contracts with some longtime customers because they refused to pay a high enough fuel surcharge to make the trip profitable,” Rawls said.
For-hire carrier Grayson runs about 300 tractors pulling flatbeds, mostly in the Southeast.
“A lot of these shippers have turned to mom-and-pop carriers that can accept lower prices,” Rawls added.
Neal Elkerton, vice president of the six-trucks for-hire Rocky Mountain Transport, Fort Morgan, Colo., also said shippers were trying to take advantage of weak demand.
“We’ve been structuring our rates so that the surcharge covers only the increase in fuel and nothing more, but many customers try to dictate to us what they’ll pay, especially on longer hauls,” Elkerton told TT.
With the 10-cent drop in the price of diesel over the past two weeks, it cost truckers an average of $654 last week to fill the two 100-gallon fuel tanks found on most heavy-duty trucks.
A year ago, diesel sold for an average price of $2.43 a gallon, which means a fill-up would have cost an average of $486 — $168 less than last week.
The trucking industry burns an average of 730 million gallons of diesel weekly, so the industry had to spend about $613 million more to buy diesel last week than in the same week last year.
Average diesel prices dropped the most last week in California, where prices fell 9.9 cents to $3.36 a gallon, DOE said.
The highest average diesel price last week was in New England, at $3.594 a gallon, down 2.7 cents from the previous week, the smallest drop in any region, the agency said.
The average price of diesel climbed above $3 a gallon for the first time last year during the week of Sept. 24, when it rose to $3.032 a gallon. It has not fallen under $3 a gallon since.