Editorial: Diesel Fuel Woes Redux

That was a pretty short honeymoon we had with lower fuel prices. After two straight weeks of price declines, we’re back in the soup: last week brought another national record high price for diesel fuel; a 24-year low for U.S. petroleum distillate inventories; retail diesel approaching $2 a gallon in places; and more reports of economic woes from truckers.

The national average price for retail diesel rose 5.6 cents to $1.67 in the federal government’s weekly report, the highest average on record.

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And things will surely get worse, since crude oil prices jumped again last week, promising more price shock at the pump in future weeks.

Crude oil for November delivery rose to almost $35 a barrel in New York on Oct. 16, and the American Petroleum Institute reported that U.S. distillate inventories had hit the 24-year low. Wholesale petroleum prices are now up by almost 50% over year-ago levels.

And even before things have a chance to get worse, several publicly traded carriers reported sharply lower earnings last week, in large part thanks to skyrocketing fuel prices.

Fuel surcharges aren’t covering all of truckers’ added expenses, which is undermining the financial health of even large carriers.

Some truckers are now finding themselves in the fuel business, as firms look to protect themselves from price increases and potential supply shortages by purchasing fuel through auctions.

And the higher fuel prices are exacerbating the drastic fall in the value of used trucking equipment.

With at least 1,300 smaller fleets closing their doors since fuel begin its steep rise early this year, and with at least 35,000 owner-operators believed to have returned their vehicles to their lenders or leasing companies, used equipment prices continue to drop.

Add to this scenario an economy that is slowing down, thanks to interest rate increases orchestrated by the Federal Reserve Board, and it is a gloomy picture indeed for truckers.

So far, Washington is offering only hope. Energy Secretary Bill Richardson last week said the Clinton Administration’s plan to lower fuel costs “is working.” We wonder how many miles per gallon you can get on wishful thinking.