This Editorial appears in the May 9 print edition of Transport Topics. Click here to subscribe today.
The national average retail price for diesel has increased by 14.4% over the most recent 11 weeks. Such a sentence would normally give fleet managers the creeps, invoking the specter of a dreaded fuel spiral.
This particular gain, though, to $2.266 a gallon, is a bit more difficult to assess.
To start, the price increased after the fuel dropped to $1.98 a gallon — the lowest price since early 2005. Diesel followed the trail blazed by crude oil down to $26.21 a barrel, the lowest close since May 2003.
Such numbers were too low to last long. As we noted at the time, the too-good-to-be-true prices brought their own problems, such as a wobbly stock market and a severe plunge in loads to haul for the oil and gas industry.
Domestic oil production peaked in early June last year at 9.61 million barrels a day. That production contributed strongly to this year’s low February prices.
The market started correcting, and U.S. production is back down to about the level of September 2014. Oil inventory still is quite high, though, because the nation has curbed some of its need for petroleum through general efficiency gains and because of a lackluster economy.
So the percentage gains for prices of diesel, crude oil and gasoline are rather high since the start of the year, but the dollars and cents involved aren’t nearly as ferocious as the disastrous surge during the first half of 2008. Like many in the industry, we remember $4.75-a-gallon diesel and $145-a-barrel crude.
And next? Major Middle Eastern producers are extracting strongly, and world economic output is growing anemically, at best, so there probably is room for more price increases, but not at a rapid pace — unless a major price shock erupts unexpectedly. (It’s amazing how often those occur.)
Well-constructed and enforced fuel surcharges should be able to handle for fleets what’s going on now, but recent events do impress upon us the desirability of domestically produced energy. At a recent American Trucking Associations meeting, a speaker said the fracking boom has been one of the most important stories of this century.
Hydraulic fracturing should be regulated and greenhouse-gas emissions are a legitimate concern, but the United States should not walk away from domestic energy. Being entirely dependent on foreign production is not the path on which we should embark.
