Diesel prices continue march to $4 per gallon
March 15, 2011 - LM Editorial
Diesel prices remained up for the 15th consecutive week, according to data from the Department of Energy’s Energy Information Administration (EIA).
Following a cumulative 29.8 cent hike over the previous two weeks. Diesel prices checked in with a 3.7 cent increase to $3.908 per gallon, noted the EIA. On an annual basis, diesel prices are up 98.4 cents.
The current price per gallon is at its highest level since hitting $3.958 the week of September 26, 2008. Diesel prices have been at $3 per gallon or more for 23 straight 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.
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.
U.S. crude for April delivery slid $3.77 to $97.42 a barrel in electronic trading, according to a CNN report. Tom Kloza, chief oil analyst for the Oil Price Information Service, told CNN that the drop in oil prices as “long overdue” because the “market was anticipating every possible imperfection that could drive prices higher, and it was ignoring the various imperfections that could send prices lower.”
In terms of how these prices can impact supply chain and logistics operations at a time when freight volumes are showing 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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