The U.S. average retail price of diesel fuel rose 2.4 cents to $3.157 a gallon, the sixth straight week that the trucking industry’s main fuel has increased in price, according to the weekly report from the U.S. Department of Energy’s Energy Information Administration.
Diesel costs 57.4 cents per gallon more than it did one year ago.
The average price of diesel rose in all regions nationwide. California is the most expensive place to buy diesel, with a gallon going for $3.834, followed by the West Coast at $3.640. The Gulf Coast had the lowest price at $2.946 a gallon, EIA reported.
Gasoline also keeps getting more expensive, hitting an average price of $2.846 a gallon April 27, a rise of 4.8 cents from the previous week and up 43.5 cents from one year ago.
Traders on the Nymex sent the price of West Texas Intermediate crude oil futures higher to close April 30 at $68.46 per barrel, up more than 3% since its close of $66.22 on April 16.
Several factors are pushing prices higher. OPEC remains committed to cutting oil production until the end of this year. And remarks by U.S. Secretary of State Mike Pompeo recently in Israel indicated that President Donald Trump on May 12 could pull the United States out of an international nuclear accord with Iran.
Meanwhile, EIA is predicting that economic growth, industrial output and international trade activity will drive diesel and gasoline prices higher this summer, the period from April through September.
EIA is forecasting the average diesel fuel retail price will be $2.92 a gallon this summer, up 13% from $2.59 last year. The price this year is under the five-year average of $3.09 a gallon. The agency says the coming months will see the highest use of diesel fuel and heating oil since 2007.
Gasoline will average $2.74 this summer, up from $2.41 in summer 2017.
Carriers are watching diesel prices closely as the rising expense joins driver compensation this year as an inflationary factor in their operations.
“Fuel, depending on the month, but more often than not has been a headwind as of late,” Knight-Swift Transportation Holdings CEO David Jackson told analysts during the firm’s recent earnings call. “And more recently now, as we move into the second quarter, it’s consistently been a headwind.”
In contrast, Covenant Transportation Group said its fuel-hedging efforts have helped it to offset other cost increases.
The truckload carrier saw its operating costs per mile in its asset-based division increase 26 cents per mile largely due to higher employee wages, Chief Financial Officer Richard Cribbs said during Covenant’s analyst call.
“These increases were partially offset by lower net fuel costs,” due to a fuel hedge in effect for the rest of the year, Cribbs said.
However, that hedge won’t be in place next year, he noted.
There is good news on the energy front, with EIA projecting that U.S. crude oil production will average 10.7 million barrels a day this year, the highest annual average production level for the fuel. That would top the previous record of 9.6 million barrels a day set in 1970.
EIA also is forecasting that 2019 crude oil production will average 11.4 million barrels a day.