Diesel prices are down for second straight week, reports EIA

The average price per gallon of diesel gasoline dropped for the second straight week, according to data released by the Department of Energy’s Energy Information Administration (EIA).

The average price per gallon fell 4.2 cents to $4.088 per gallon, on the heels of a 2.9 cent dip last week. Prior to these two weeks of declines, prices rose a cumulative 26.5 cents over a six week span.

During the week of February 25, the average price per gallon hit $4.159 per gallon, which marked the highest point for diesel prices since hitting $4.207 per gallon the week of August 18, 2008. The preceding week’s tally of $4.157 from the week of February 18 was the previous high point, topping the then-recent high of $4.116 from the week of October 22.

On an annual basis, the average price per gallon is down 3.5 cents, with the previous three weeks up 3.6 cents, 10.8 cents, and 19.7 cents, respectively.

In its recently updated short-term energy outlook, the EIA is calling for diesel prices to average $3.92 per gallon in 2013 and $3.82 in 2014, with WTI crude oil is expected to hit $92.81 per barrel in 2013 and $92.17 in 2014.

As previously reported, regardless of the fluctuation in diesel prices, shippers are cognizant of the impact diesel prices can have on their bottom line—for better or worse.
And they continue to be proactive on that front, too, by taking steps to reduce mileage and transit lengths when possible as well as cut down on empty miles.

And even through shippers want to adjust budgets in order to offset the increased costs higher fuel prices bring, it is not always an easy thing to manage.

The focus from a supply chain management perspective, according to shippers, is more on utilization and efficiency by doing things like driving empty miles out of transportation networks.

Shippers have told LM that adjusting budgets is only part of the solution when it comes to dealing—and living—with fuel price fluctuation. 

A transportation sustainability expert told LM that the increase in diesel prices is reflective of the changes and challenges taking place within the global economy.

“As China demands more oil for their growing economy; tensions remain high in the Middle East; OPEC reduces output in an attempt to increase the price of a barrel of oil; the U.S. chooses not to build new refineries or approve the required pipeline infrastructure to take advantage of all available fuel sources; and exporting of fuel and Liquid Natural Gas continues at a slow pace, corporations will be challenged by fluctuating fuel costs,” said Brittain Ladd, a global supply chain consultant. “To minimize the impact of fuel costs, corporations need to refocus their efforts to collaborate with their trucking providers to ensure that every effort is being made to maximize equipment utilization, reduce out-of-route miles, and take advantage of fuel programs that identify the lowest diesel prices.”

Ladd also pointed out that longer term strategies continue to include optimizing logistics networks and distribution/replenishment strategies that will minimize transportation. In addition, he said corporations need to be proactive in pushing for LNG as an alternative to diesel when possible and an increase in the number of trailers that can be pulled by a tractor.

In a recent column for LM, Derik Andreoli, Ph.D.c. Senior Analyst at Mercator International, LLC, cited the American Trucking Research Institute (ATRI) whom stated fuel costs account for roughly 35 percent of average marginal costs per mile, and with diesel prices expected to remain high, competitive advantage will be bestowed on trucking companies who are best able to manage fuel consumption and contain fuel costs.

“Overall, aerodynamics may account for 15 percent to 22 percent of energy losses for a fully loaded Class 8 truck traveling at highway speeds,” wrote Andreoli. “Significant fuel savings can be realized by matching cab height to trailer height, reducing the gap between the cab and the trailer, and installing fairings on the chassis and the trailer. Additional savings can be had by rounding the corners on trailers, installing wheel covers, removing sun visors and auxiliary mirrors, and installing aerodynamic primary mirrors or rear facing video cameras.”

The price per barrel for oil is at $90.31 on the New York Mercantile Exchange at press time.