Diesel prices up for first time in five weeks
September 14, 2010 - LM Editorial
Following four straight weeks of declines, diesel prices went north for the week ending September 13, according to data released this week by the Department of Energy’s Energy Information Administration (EIA).
Average diesel prices for the week of September 13 at $2.943 per gallon were up 1.2 cents from the week of September 6. Prior to this increase, diesel prices have been heading down since reaching $2.991 the week of August 9, falling a cumulative six cents from August 9 to September 6, according to EIA data.
The current average price per gallon of diesel is 30.9 cents higher than a year ago, and prices have now been below the $3 per gallon mark for the last 16 weeks. What’s more, the current average price per gallon of diesel is 18.4 cents below the 2010 weekly high of $3.127 per gallon from the week of May 10.
Current prices are slightly above the recently-revised EIA recent Short Term Energy Outlook, which is now calling for 2010 average diesel prices to be $2.93 per gallon and $3.10 in 2011.
The EIA is calling for 2010 crude oil prices to hit $79.13 per barrel and 2011 prices at $83.50 per barrel. This is below current oil prices, which are at $77.19 (as of press time), which is roughly $4 higher than last week. Various report have indicated current oil prices have been relatively low due to higher inventories which is a sign of weaker demand and slowing economic growth. Another reason for declining prices is that summer driving season is over, which means fewer people are driving.
But that situation might me temporary, with oil experts saying this week that the recent run-up in oil prices is due to renewed confidence in economic growth in the U.S. and China.
And Mike Fitzpatrick, vice president of MF Global, said in a MarketWatch report that said crude oil prices heading towards $80 a barrel might become threatening to the U.S. economy, adding that the fate of China’s export-driven economy remains linked to that of the U.S., which is struggling with “nagging unemployment and static money supply growth.”
As LM has reported, even though diesel prices appear to be in check for the time being, freight transportation stakeholders maintain that there is no real rhyme or reason when it comes to assessing the string of rising and falling fuel prices.
Some experts say that the there has never been a period of volatility in fuel prices like there has been in the last year. And with prices currently down by no means indicates prices will stay down or sharply go up.
If diesel prices do remain down, it is likely to have a significant impact on both shippers and carriers. But with the amount of volatility regarding fuel prices, the direction prices eventually head in is uncertain.
A shipper recently told LM that 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. And because of this, the shipper explained that shippers must be acutely aware of what percentage of their invoice cost is actual fuel surcharge.
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