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Diesel prices head up for second straight week on heels of five straight declines

By Staff
April 29, 2014

Following a five-week stretch which saw the average price per gallon of diesel gasoline drop a cumulative 6.27 cents, the average price per gallon headed up for the second straight week, according to data released by the Department of Energy’s Energy Information Administration (EIA).

Diesel saw a 0.4 cent gain to $3.975 per gallon after heading up 1.9 cents to $3.971 last week.

Compared to the same week a year ago, prices are up 1.24 cents and year-to-date (since January 6), the average price per gallon is up 6.5 cents.

As LM has reported, with prices continuing to hover around the $4 per gallon mark
adjusting budgets is only part of the solution when it comes to dealing—and living—with fuel price fluctuation, according to shippers.

In some cases they look for hedge diesel prices when it is applicable, shippers have told LM. This involves committing to a certain price on fuel at which pay to a certain rate at which point it is frozen at that rate for the shipper. And it also requires shippers to be focused on keeping their drivers on the road as much they can and being profitable and not in detention.

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.

And the fact that if prices rise on average has a direct effect on fuel surcharges paid by shippers is always top of mind for them.

“Continued increases in fuel surcharge will drive shippers ultimate transportation spend to all time highs,” a shipper said in an interview. “Carriers will do all they can to pass any excess cost back to the shipper, smaller carriers are definitely feeling the pain associated with the fuel increase and are demanding more for their services.  When it becomes time to negotiate rates, carriers will be talking a lot about the cost of fuel and using it as a leverage point for general rate and line haul increases.  Shippers must be acutely aware of what percentage of their invoice cost is actual fuel surcharge.”

A recent study from non asset-based 3PL Transplace found that the fuel surcharge was the most common accessorial published by shippers.

Transplace said that the majority of surveyed shippers used a cents-per-mile schedule compared to a percentage based fuel method. And companies using the cents-per-mile schedule mostly target their FSC starting point around the traditional $1.17 to $1.24 range, with 73 percent divided between $.05 and $.06 increments beyond the starting point. The company explained that the trend is towards $.06 brackets, which is a recognition of both the increasing burden of fuel in overall transportation costs and the significant increase in average miles per gallon for truckload carrier’s fleets over the past few years.

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For February, the month for which most recent data is available, the SCI dropped to -1.0 from January’s 2.6, with FTR explaining that the short term positive impact from one-time adjustments for rapidly dropping diesel prices and the suspension of the 2013 motor carriers hours-of-service expires later this year.

Seasonally-adjusted (SA) for-hire truck tonnage in March was up 1.1 percent on the heels of a revised 2.8 percent (from 3.1 percent) February decline, with the SA index at 133.5 (2000=100). This is off 0.3 percent from the all-time high for the SA of 135.8 from January 2015 and is up 5 percent annually.

Intermodal volume was up 8.1 percent annually at 280,016 containers and trailers. This outpaced the week ending April 11 at 270,463 and the week ending April 4 at 271,127. AAR said this tally marks the second highest weekly output it has ever recorded as well as the first time container and trailer traffic was higher than carloads for a one-week period.

Ocean cargo carrier service reliability across the three core East-West trades hit a five-month peak in March with an aggregate on-time performance of 64 percent, according to Carrier Performance Insight, the online schedule reliability tool provided by Drewry Supply Chain Advisors.

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