Diesel prices slip but remain over the $4 per gallon mark

Diesel prices remained above the $4 per gallon mark for the third straight week despite dropping $0.7 cents to $4.098 per gallon, according to the Department of Energy’s Energy Information Administration (EIA).

This slight decline follows a 2.7 cent gain to $4.105 per gallon last week. Diesel prices have been up 19 of the last 21 weeks. And on an annual basis, the price per gallon for diesel is up $93.6 per gallon.

When diesel hit $4.078 per gallon two weeks ago, it marked the first time diesel has been above the $4 per gallon mark since the week of September 15, 2008, when it hit $4.023.

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.

The price per barrel for oil is currently $111.78, according to a Bloomberg report, which is the second straight day prices have fallen. The report stated that U.S. Treasury Secretary Timothy Geithner said this week that oil prices have become an obstacle to improvement in the economy, and it also mentioned that Khalid al-Falih, chief executive officer of Saudi Arabian Oil Co., said the world’s biggest oil exporter is concerned about the impact of prices on economic growth.

At last week’s NASSTRAC Logistics Conference and Expo in Orlando, Fla., shippers and carriers both expressed ongoing concern about the price of diesel and oil. While many said prices at current levels are still digestible, they cautioned that could quickly change depending on how quickly prices rise with summer driving season approaching.

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.

This was made clear in a recent Logistics Management reader survey of roughly 250 shippers. The survey found that if fuel prices continue their ascent, 70 percent—or nearly 180—of the shippers surveyed indicated they would need to adjust their freight budget to cover higher than budgeted fuel prices.

Nearly 40 percent of shippers said they would adjust their fuel budgets by 6-to-10 percent and 15 percent of shippers said they planned to adjust budgets by 11-to-15 percent.

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