Diesel Soars Another 22.6¢ to Record $4.723

Fuel Average Tops Year-Ago Price by $1.906
By Jonathan S. Reiskin, Associate News Editor
This story appears in the June 2 print edition of Transport Topics.

Diesel continued to soar last week, jumping 22.6 cents to put the national average retail price at an unprecedented $4.723 a gallon, according to the Department of Energy.
At the same time, the average for a gallon of gasoline rose 14.6 cents to a record $3.937, DOE’s Energy Information Administration re-ported after its May 26 weekly survey of filling stations. The refined products continued to rise even as crude oil prices fell from their recent high-water marks.
EIA said California’s diesel average shot up 29 cents a gallon to $5.027, while prices in the Central Atlantic states ran around $4.913. The Rocky Mountain region was the “bargain” region, with a $4.653 average for fuel.
The chairman of the Truckload Carriers Association said fleets are struggling to combine highly volatile diesel prices with slow overall business.
“It’s very difficult to manage against a moving target like this,” said Ray Haight, who is also executive director of MacKinnon Transport, Guelph, Ontario. He said some members would like EIA to update fuel prices three times a week rather than every Monday so they can keep fuel their fuel surcharges more current.
Last Memorial Day, the diesel average was $2.817, and gasoline was $3.209. Therefore, diesel has risen by $1.906 a gallon and gasoline by 72.8 cents. Based on industrywide consumption figures compiled by American Trucking Associations, trucking is paying $1.4 billion more a week for diesel than it did a year ago and $204.4 million more for gas.
Haight said truckers are wrestling over whether to walk away from business that cannot, or will not, pay surcharges.
“That’s a tough decision to make now, but a nondecision is even worse,” he said.
Frozen Food Express Industries of Dallas said May 29 it would lower the cap for maximum speed on its company tractors to 62 miles per hour from 65 mph. The company ranks No. 55 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers.
“We simply have to take some definitive action, as many other carriers have done, to offset costs that are rising faster than our ability to deal with them,” said Chief Operating Officer Russell Stubbs.
As recently as Jan. 28, diesel was in relative decline, selling for an average price of $3.259 a gallon. Since then, it has risen in 13 of 17 weeks by a combined amount of $1.464 a gallon, or 44.9%. In the last three weeks alone, trucking’s main fuel has risen by a weekly average of 19.1 cents a gallon.
Gasoline has followed a similar course. The low point for the gas average this year was $2.96 a gallon on Feb. 11. Since then, it has risen 14 of the last 15 weeks — including the last nine in a row. During that time the average has risen 97.7 cents a gallon, or 33%.
Some carriers have not been able to survive the enormous shift. Jevic Transportation, a less-than-truckload carrier ranking No. 71 on the TT 100 list, went out of business last month, citing fuel prices as a major difficulty (5-26, p. 1; click here for previous Premium Content story).
Danny Nicholson Inc., a smaller North Carolina truckload carrier, filed for bankruptcy and the company’s controller said fuel costs were the major reason, but the firm remains in business and is trying to reorganize.
High diesel prices have caused anger and worry in Europe as well. Wire services reported of demonstrations in Bulgaria, France, Great Britain, Italy, the Netherlands and Spain by truckers and fishermen who operate diesel-powered trawlers.
Crude oil, which has risen explosively this year, was calm last week. After setting a closing record May 21, at $133.17 a barrel, crude dropped some, falling to $128.85 on May 27 before closing at $126.62 on May 29.
Oil’s low close on the New York Mercantile Exchange for the year was $86.99 on Jan. 23. From that point to the record was a 53.1% rise in just four months.
ATA’s chief economist, Bob Costello, said views on oil’s future are in a state of great flux. He said forecasts for prices in the near future range from a high of $400 a barrel down to as low as $85.
“The point of it all is that nobody really knows,” Costello said.
He added that even with well-publicized increases in demand for petroleum from China, India and other countries, “the markets are not working on pure supply and demand fundamentals.
“Yes, there is strong demand for oil, but not that strong,” said Costello, adding that oil might be the latest in a series of speculative bubbles, dating back to technology stocks, which burst in 2000, and residential real estate, which burst in 2006.