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Diesel prices head up another 7.5 cents per gallon

By Jeff Berman, Group News Editor
February 08, 2011

Diesel prices continued heading north, with a 7.5 cent increase to $3.513 per gallon, according to the Department of Energy’s Energy Information Administration (EIA). And current prices are up 74.4 cents annually.

This is the tenth straight week prices have risen for a cumulative 35.1 cent gain along with it marking the fourth straight week prices have topped the $3.40 per gallon level since hitting $3.482 during the week of October 20, 2008. What’s more, this week’s nearly 8 cent increase per gallon is the single biggest week-over-week spike since April 2010 and the highest level per gallon since hitting $3.659 the week of October 13, 2008.

Diesel prices have been at $3 per gallon or more for 19 consecutive weeks. Prior to the week of October 4, when diesel prices hit $3.00 per gallon, the price per gallon of diesel was below the $3.00 mark for 18 straight weeks. But the recent rise in prices is in line with gains in the price per barrel of crude oil, which has been hovering in the mid-$80s to high $90s, on average, during the same period. 

Oil barrel prices were trading at $87.59 on the New York Mercantile Exchange as of this morning, according to media reports. This was down compared to $92 per barrel last week, due to fears easing that protests in Egypt could disrupt Middle East crude supplies, according to an Associated Press report.

But despite this recent decrease, there is increasing speculation that the price per gallon of diesel and regular gasoline could approach the $4 per gallon level, due to things like higher global demand for oil and a cold winter in many parts of the United States and Europe, leading to higher oil prices, according to media reports.

If these oil increases are to continue, it will likely lead to a scenario where shippers need to be prepared to plan for them accordingly, especially when taking into consideration the relatively low fuel prices they factored into transportation budgets for much of 2010.

And should prices return to the record-breaking levels of 2008, when diesel was $4.78 per gallon and barrel prices were in the $150 range, it could lead to a return to the past in which fuel consumption patterns forced shippers to consider things like bringing more manufacturing operations closer to home—a practice also commonly referred to as near-shoring or near-sourcing.

The EIA is calling for 2011 crude oil prices to hit $93.42 per barrel, according to its recently-revised short-term energy outlook. This is above previous estimates of $79.41 per barrel for 2010 and $85.17 per barrel for 2011.  On the diesel side, the EIA is calling for the price per gallon of diesel in 2011 to average $3.40, up from a previous estimate of $3.23.

Michael A. Regan, CEO & Chairman of the Board, TranzAct Technologies, wrote in a recent blog entry for LM that these ongoing diesel increase could have a hazardous effect on shippers’ freight budgets.

With the price per gallon of diesel going from a Department of Energy 2011 projection of $2.96 per gallon in September to $3.14 per gallon in January to its current estimate of $3.40 per gallon, Regan pointed out that with diesel historically at its lowest in the first quarter of each year, shippers can expect to be paying much more than $3.40 per gallon for diesel throughout the 2011. And with these current prices potentially sticking around, Regan explained that “shippers could be paying as much as 15% to 20% more for freight than they did in 2010 (depending on their fuel surcharge calculation).”

For more articles on diesel prices, click here.

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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