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Diesel prices fall 4.7 cents per gallon

By Jeff Berman, Group News Editor
September 27, 2011

Diesel prices decreased for the third straight week, falling 4.7 cents to $3.786 per gallon, according to the Department of Energy’s Energy Information Administration.

This nearly 5 cent dip follows 2.9 cents and 0.6 cent decreases over the previous two weeks, respectively. Those lulls were preceded by a 5.8 cent gain over the previous two weeks. Prior to that, prices were down for four straight weeks, falling 2.5 cents, 6.2 cents, 4 cents, and 1.2 cents per gallon, respectively, over that period. Before that month of declining prices, diesel saw a cumulative 9.9 cent gain over a three week period.

The price per gallon is now 33.8 cents below the 2011 high of $4.124 per gallon the week of May 2, which marks the highest level for diesel prices since August 2008, when prices were approaching $5 per gallon. The price per gallon for diesel fuel has not exceeded the $4 mark since the week of May 16, when it hit $4.061.

Diesel is now 83.5 cents higher than it was a year ago at this time, down from 87.8 cents and 91.9 cents over the previous two weeks. In its recently-revised short-term energy outlook, the EIA is calling for diesel prices to average $3.85 per gallon in 2011 and $3.87 in 2012, with oil pegged at $94.40 per barrel in 2011 and $94.50 in 2012, down from a recent estimate of $101.00.

Oil is currently trading at $85.73 on the New York Mercantile Exchange. According to a Bloomberg report, oil has dropped 12 percent since the end of June, the biggest quarterly loss since 2008. Prices are down 5.7 percent this month and 8.4 percent this year.

With oil prices remaining in the $80-to-$90 per barrel range, prices are still well above last year’s average of $79.64 per barrel, which means gasoline pump prices should remain higher than last year’s levels, according to various reports.

While diesel prices have been below the $4 per gallon mark, shippers and carriers have told LM the still relatively high prices remain a concern. While many have indicated that prices at current levels are still digestible, they cautioned that could quickly change depending on how quickly prices rise.

In a recent interview with LM, Chuck Taylor, founder and principal of Awake! Consulting, an organization that encourages supply chain professionals to play active roles in shaping national energy policy, explained that even with prices fairly stable at the moment, the world has entered the “Danger Zone” and there is little slack in the system.

“It won’t be long before it becomes apparent that demand is permanently outstripping supply and only solution will be to use less oil whether we like it or not,” said Taylor.

While shippers bear the brunt of higher prices at the pump in the form of surcharges from carriers, higher prices also impact carriers as they cannot pass those charges through as quickly as prices rise.

John Pattullo, CEO of CEVA Logistics, explained in an interview that CEVA passes fuel through and wants to buy fuel as efficiently as it can, with shippers wanting CEVA to pass it through at a good, efficient price.

“But it is not something that hugely impacts our business,” he said. “When prices get to a certain level, shippers look at their supply chains and try to determine if there is a more efficient supply chain design that uses less fuel.”

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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