Diesel prices resume growth path

One week after a temporary and slight respite from increasing prices, the average price per gallon for diesel fuel is heading up again, according to data from the Department of Energy’s Energy Information Administration (EIA).

After a 0.1 cent decline last week, diesel prices went up 2.5 cents to $3.932 per gallon, with prices up 99.3 cents on an annual basis.

As has been the case in recent weeks, the average price per gallon is at its highest level since reaching $3.958 the week of September 26, 2008. Diesel prices have been at $3 or more per gallon for 25 straight weeks. And prior to the week of October 4, 2010, when diesel prices hit the $3 per gallon mark, the average price per gallon was below $3.00 for 18 straight weeks.

As LM has reported, diesel prices and the price per barrel of oil have been increasing for many reasons, most notably due to political and civil unrest in the Middle East and North Africa, specifically in Libya in recent weeks, has resulted in oil producers in that region suspending or shuttering operations, according to media reports. This has subsequently led to tighter supplies, which is driving up oil and gas prices. And the recent earthquake and Tsunami in Japan also has the potential to lead to further prices hikes, too, say many industry experts.

As of press time, oil barrel prices were at $102.85 on the New York Mercantile Exchange, according to media reports, after topping $106 per barrel last week, due to the situation in Libya.

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, explaining that if prices continue to rise at their current pace, it has 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 due to the economics driving the increases in global oil prices, shippers really don’t have any choice in the matter, a shipper told LM.

“Shippers will have to pay to get their goods to market even as the price of fuel increases,” said the shipper. “The fuel surcharge (FSC) is not necessarily an evil thing. Shippers need to [partner] with transportation and logistics services companies and realize that without an FSC these companies would not likely be able to stay in business…but shippers need to do their homework to determine what the actual costs are and what percent they should pay to carriers.”

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