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Diesel prices drop nearly 5 cents per gallon, says EIA

By Jeff Berman, Group News Editor
June 01, 2011

One week after its single largest weekly drop—of 6.4 cents—in a year, diesel prices headed south for the fourth consecutive week, falling another 4.9 cents to $3.948 per gallon, according to the Department of Energy’s Energy Information Administration (EIA).

Diesel prices have fallen in five of the last six weeks, dropping a cumulative 17.6 cents since hitting $4.124 per gallon the week of May 2.

Compared to the same timeframe a year ago, the price per gallon of diesel is up 96.8 cents.

As LM has reported, even with the recent decline of diesel prices, shippers and carriers remain concerned about the price of diesel and oil. While many have indicated that prices at current levels are still digestible, they cautioned that could quickly change depending on how quickly prices rise with summer driving season officially here.

In terms of how these prices can impact supply chain and logistics operations at a time when freight volumes are showing slow but consistent growth, many shippers have expressed concern about the pace of these diesel increases should they resume weekly increases, explaining that 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.

And while the current situation may not be as dire as it was during the summer of 2008, when prices hit nearly $5 per gallon and $150 per barrel, shippers are bracing for prolonged pain at the pump, according to the results of a recent Logistics Management reader survey of roughly 250 logistics, supply chain, and transportation executives.

The survey revealed that 25 percent felt average fuel surcharges were more than 20 percent above base rates and another 19 percent say average fuel surcharges were 11-15 percent above base rates. 18 percent said average fuel surcharges were in the 16-20 percent range above base rates, with 16 percent of respondents at 6-10 percent and 13 percent saying average fuel surcharges were 1-5 percent above base rates. Another 8 percent said they were unsure of how much their average fuel surcharge was above base rates.

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.

“In 2008 when fuel prices went up, they then shot right back down,” said Eric Morley, Director of Transportation Operations at Best Buy. “It was such a small blip that by the time anybody really reacted to do anything different, it was over. The current rise in fuel costs is slower and more sustained, and everybody is looking at it a little bit differently.”
With fuel prices, for the most part seeing steady gains, the focus from a supply chain management perspective, explained Morley, is more on utilization and efficiency by doing things like driving empty miles out of transportation networks.

The price per barrel of oil is currently trading at $102.57 on the New York Mercantile Exchange, according to a Bloomberg report. This represents the highest level for oil prices since reaching $102.70 on May 4.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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