Diesel hits highest price level since August 2008

With diesel prices now over the $4 per gallon mark for the fourth straight week, the price per gallon for the week of March 19, at $4.142 per gallon, is at its highest point in nearly three-and-a-half years, according to the Department of Energy’s Energy Information Administration (EIA).

The price per gallon moved up 1.9 cents to move it into close territory with the $4.145 per gallon recorded the week of August 25, 2008, when diesel prices were on the way down from record highs just weeks earlier, with the week of July 14, 2008 representing the apex for diesel prices at $4.764 per gallon.

The current price also surpassed the most recent previous high of $4.124 per gallon during the week of May 2, 2011, with last week—March 12—just behind at $4.123 per gallon.

Diesel prices have gone up for 8 consecutive weeks and in ten of the past 11 weeks, according to EIA data. And over the past 11 weeks, prices has risen a cumulative 31.4 cents. Prior to this week’s 1.9 cent gain, prices rose 2.9 cents, 4.3 cents, and 9.1 cents, respectively, in the previous three weeks.

Compared to a year ago at this time, the price per gallon is up 23.5 cents, which is down from comparisons in the mid-80s range just a few months ago. And while prices have largely been trending down prior to this recent increase, shippers have maintained that they are forecasting for steady fuel increases in their supply chain and transportation budgets should diesel prices continue to hover near or at the $4 per gallon mark.

The EIA recently reported that in its Short-Term Energy Outlook the 2012 average for diesel per gallon is now at $41.5, with 2013 pegged at $4.11. The 2011 average was $3.84.

As LM has reported, shippers continue to take steps to minimize the impact of fluctuating fuel costs. Over the years, they have maintained that this is imperative as higher diesel prices have the potential to hinder growth and increase operating costs, which will, in turn, force them to raise rates and offset the increased prices to consumers.

An Associated Press report noted that Crude has jumped from $96 last month and $75 in October on signs of an improving U.S. economy.

In a recent LM survey of about 345 shippers, there was some variation as to how much shippers planned on adjusting budgets, with 40 percent planning to raise or adjust freight budgets by 5 percent or less and 38 percent planning on a 6-10 percent hike. And 10 percent of shippers said they planned to modify budgets by 11-15 percent, followed by 5 percent planning on a 16-20 percent adjustment. Five percent on shippers said they intend to adjust budgets in the 16-50 percent range, and 4 percent intend on even more significant increases from 21-99 percent.

But adjusting budgets is only part of the solution when it comes to dealing—and living—with fuel price fluctuation, according to shippers.

“Right now we are looking at hedging diesel ourselves to see if it makes sense for us,” said Wayne Johnson, manager, carrier relations at Owens Corning. “This will involve us committing to a certain price on fuel at which pay to a certain rate at which point it is frozen at that rate for us. We are also focused on keeping our drivers on the road as much as we can and being profitable and not in detention, and we are also putting in more carrier pools and improving lead times to our plants from 45 minutes to the 20 minute range and get drivers in and out of our plants as quickly as we can.”

Other steps being taken by shippers to combat high fuel prices include things like focusing more on utilization and efficiency by doing things like driving empty miles out of transportation networks.