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May 28, 2007 7:45 AM, EDT

Diesel Rises 3¢ to $2.803 a Gallon

Gasoline Sets Another Record After 11.5¢ Jump
By Andrea Fischer, Staff Reporter
This story appears in the May 28 print edition of Transport Topics.
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The U.S. average retail price for diesel rose 3 cents to $2.803 a gallon last week, following a stretch of four straight decreases, while retail gasoline spiked another 11.5 cents to an all-time record of $3.218, according to the Department of Energy.
The diesel increase was the first since April 16, when the average was $2.877, its highest point this year; it had fallen 10.4 cents over those four weeks.
Diesel is now 8.5 cents lower than during the corresponding week a year ago but 39 cents above the lowest price so far this year of $2.413 on Jan 29.
At that price, trucking spent about $285 million more for its diesel fuel last week than at the end of January, because the industry burns about 730 million gallons a week.
Diesel’s upturn is a sign that refinery problems are now starting to take a toll on diesel prices, not just gasoline, said Tom Kloza, chief oil analyst for DOE’s Oil Price Information Service.
“Diesel prices are not growing like they did near their all-time high, but supply is starting to get pretty tight. The same things that impacted gasoline are starting to impact diesel,” Kloza said. “Refinery problems have constricted the overall supply of fuel — we just didn’t see the effect with diesel initially.”
DOE figures also show that gasoline, at $3.218, has surged $1.05 a gallon from the low this year of $2.165 on Jan 22. It is now 32.6 cents higher than the corresponding week a year ago and 14.9 cents higher than the previous record of $3.069, set in September 2005, following Hurricane Katrina.
Guy Caruso, chief of DOE’s Energy Information Administration, said May 23 in an interview with CNBC that “higher-than-expected refinery outages, combined with geopolitical problems,” are responsible for high prices.
He added prices should “start to ease” as fuel imports increase the nation’s inventories, but there “is a fundamental infrastructure problem, there is not enough refinery capacity in this country . . . and there is a tightness [of fuel supply] in the global market.”
U.S. refining capacity is about 5% below normal production capacity, Caruso said.
Paul Mueller, president of P&B Trucking, a Bismarck, N.D., truckload carrier, said his company is looking at ways to reduce idling in order to cut costs.
“We’re putting auxiliary power units on five trucks in the next few weeks to try to bring our cost down by eliminating or reducing idling,” Mueller said.
The company does not currently use APUs, but Mueller said if the test on the five units is successful, he will install the devices on his entire fleet. He predicted the devices could reduce the company’s fuel bill by about 5%.
“Limiting the time a driver is idling . . . looks like it will make the most difference in our bottom line now,” he said.
Besides rising diesel prices, Mueller said, “we’ve seen a noticeable loss of fuel mileage — up to 8% with the new [ultra-low-sulfur diesel] fuel.”
That loss translates to an increase of nearly $210,000 in fuel costs in 2007 for P&B, which spent about $2.1 million to fuel the company’s 50 trucks last year, Mueller said.
Danny Kellison, a dispatcher for Burns Motor Freight, a Marlinton, W.Va., flatbed carrier, said his company’s fuel surcharge “helps us recoup a little bit of our fuel cost,” but “we have to work hard to control [that cost] where we can.”
Kellison said his company uses Web load boards and other methods to minimize deadhead miles.
Meanwhile, crude oil prices rose 4% on May 23 to close at $65.77 a barrel on the New York Mercantile Exchange on skepticism among traders that U.S. refineries can produce enough gasoline to keep up with increasing demand this summer, Bloomberg News reported.
Distillate inventories, which include diesel, rose 4.3% to 120.3 million barrels in the week ended May 18, and gas stocks rose 1.43 million barrels to 196.7 million. Despite the increases, gas supplies are 7% lower than the five-year average, and distillates are below the upper end of the average range for this time of year, DOE said.