April 23, 2007 7:45 AM, EDT

U.S. Fuel Prices Continue to Rise

Diesel, Gasoline, Crude All on Upward Trend

By Tarun Reddy, Staff Reporter
This story appears in the April 23 print edition of Transport Topics. Click here to subscribe today.

U.S. fuel prices continued to rise last week as heavy demand for diesel and gasoline combined with high crude oil prices and a string of refinery shutdowns.
The average cost of a gallon of diesel rose 3.7 cents to $2.877, while gas rose 7.4 cents to $2.876, according to the Department of Energy in its latest weekly survey of retail filling stations.
The diesel average has now risen 46.4 cents over the last 12 weekly DOE surveys, partly because of surging diesel demand in Europe, China and India, the agency said.
The average also was pushed up by high crude oil prices, high domestic demand for both diesel and gasoline and an unusually large number of refinery shutdowns, according to DOE.
Over the last 12 DOE gasoline surveys the price has now increased 71.1 cents a gallon.
The two fuel averages are close to equal for the first time since last summer, with diesel averaging $2.877 a gallon and gasoline $2.876. On June 5, diesel sold for $2.89 and gasoline for $2.892.
“Diesel prices have traditionally fallen in the summer, while gasoline went upward, but diesel demand has gained a lot of strength, and India, Europe and China are a big part of the reason for that, which will keep diesel prices just as high as gasoline this summer,” Laurie Falter, an analyst at DOE’s Energy Information Administration, told Transport Topics.
“Other factors for fuel increases were crude oil prices that jumped nearly $13 a barrel since January, much stronger U.S. gasoline demand than usual, refinery shutdowns and increasing production costs to refine crude,” Falter said.
Crude oil closed at $63.13 a barrel on the New York Mercantile Exchange on April 18. Crude hit its low price to date for 2007 on Jan. 18, when it sold for $50.48 a barrel.
American Trucking Associations said April 16 truckers would pay more than double for diesel fuel this year — $106 billion — than they did just four years ago. Truckers also are expected to pay $38 billion for gasoline in 2007.
Robert Monson, president of Monson Trucking Inc. in Duluth, Minn., told TT that fuel surcharges no longer cover the added cost of fuel and he has raised his freight fees to make up the difference.
“We started putting fuel surcharges in all our contracts nearly two years ago,” Monson said. “Since diesel has been climbing again, we get resistance for bigger fuel surcharges, so we raised our freight charges instead,” he said. “Everybody’s doing it that way.”
Monson Trucking, a regional Midwest carrier that hauls paper and paper-related products, has 205 tractors, all with sleepers, and 500 trailers.
Diesel has generally been more expensive than gasoline over the past year, sometimes by as much as 30 cents a gallon. The last time gasoline was more expensive was July 31, 2006, when it sold for $3.004 a gallon and diesel was $2.98 a gallon.
DOE predicted that the traditional summer decline in diesel prices will not occur this year because global demand for fuels is rising and refining capacity tight.
“Retail regular grade motor gasoline prices are projected to average $2.81 per gallon this summer, compared to $2.84 per gallon last summer,” EIA said. “Retail diesel fuel prices are expected to average $2.82 per gallon this summer.”
Daniel Hofstad, analyst at Kansas City-based FDStone Trading LLC, and EIA’s Falter agreed that high demand combined with shutdowns at refineries for spring maintenance or mechanical problems also contributed to price increases.
“Gasoline demand has been the highest in the nation’s history for this late winter, early spring period, when use usually drops,” Hofstad said.
According to Falter, “Many more refineries than expected went off-line for routine spring maintenance earlier than normal and stayed shut longer, while other refineries shut because of mechanical problems.”
Americans bought more than 257 million gallons of gasoline per day this January, more than 10 million gallons a day more than last January, when the daily average was 247 million gallons, EIA said.
“Over the last four weeks, motor gasoline demand has averaged nearly 9.4 million barrels per day, or 2.5% above the same period last year,” the EIA report said. Demand for distillate fuels, which include diesel, has averaged more than 4.3 million barrels per day over the last four weeks, a gain of 0.9%.
EIA said the national gasoline inventory dropped 5.5 million barrels to 199.7 million barrels April 6, the ninth straight weekly decline. Inventories of distillates rose 100,000 barrels to 118.1 million barrels.