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Diesel prices shoot up 8 cents, says EIA

By Jeff Berman, Group News Editor
October 18, 2011

After five straight weeks of declines, the price per gallon for diesel gasoline spiked 8 cents to $3.801 per gallon, according to the Department of Energy’s Energy Information Administration.

Prior to this increase, prices were down a cumulative 14.7 cents for the preceding five weeks.

The average price per gallon for diesel is now 32.3 cents below 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 currently 72.8 cents higher per gallon than it was a year ago, higher than the 65.8 cent annual gap from a week ago. This is still down from declines in the mid-80s and higher for most of 2011.

In its short-term energy outlook, which was updated earlier today, the EIA is calling for diesel prices to average $3.80 per gallon in 2011 (down from $3.80) and $3.73 in 2012 (down from $3.87), with oil pegged at $92.36 per barrel in 2011 and $88 in 2012.

The price per barrel is currently trading at $88.06 on the New York Mercantile Exchange. The Associated Press reported that recent increases in price are due in part to September retail sales showing a 1.1 percent gain.

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.

At the Council of Supply Chain Management Professionals Annual Conference in Philadelphia this month, Chick Taylor, Chuck Taylor, founder and principal of Awake! Consulting, an organization that encourages supply chain professionals to play active roles in shaping national energy policy, noted that should oil prices eventually rise to $200 per barrel or more, it could spell significant trouble for shippers’ supply chain operations.

“These 12,000-mile supply chains are not going to survive if that happens,” said Taylor. “[Shippers] need to start thinking about what they are going to be doing, because a lot of stuff they are doing in China and India now will need to move to closer places like Mexico.”

Taylor said such an event could serve as an impetus for how supply chains function and operate. He explained that in a steel shipper cannot move iron ore from Brazil to China to be processed and then shipped to the U.S. at $200 per barrel. When this happened in 2008, he noted that steel production in the Midwest started to come back. 

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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