Diesel prices drop for first time in three weeks

Diesel prices dropped this week, snapping a two-week stretch of increases, according to according to data released by the Department of Energy’s Energy Information Administration (EIA).

The average price per gallon of diesel fell 1.1 cents to $3.964 per gallon. The gains of 0.4 cents and 1.9 cents, respectively, over the previous two weeks marked the first weekly increases since the week of March 10, which saw a 0.5 cent increase to $4.021, which marked the highest weekly price in a year.

On an annual basis, diesel is up 11.9 cents and on a year-to-date basis (since January 6) is up 5.4 cents.

As LM has reported, with prices continuing to hover around the $4 per gallon mark
adjusting budgets is only part of the solution when it comes to dealing—and living—with fuel price fluctuation, according to shippers.

In some cases they look for hedge diesel prices when it is applicable, shippers have told LM. This involves committing to a certain price on fuel at which pay to a certain rate at which point it is frozen at that rate for the shipper. And it also requires shippers to be focused on keeping their drivers on the road as much they can and being profitable and not in detention.

Other steps being taken by shippers to combat high fuel prices include things like focusing more on utilization and efficiency by doing things like driving empty miles out of transportation networks.

And the fact that if prices rise on average has a direct effect on fuel surcharges paid by
shippers is always top of mind for them.

“Continued increases in fuel surcharge will drive shippers ultimate transportation spend to all time highs,” a shipper said in an interview. “Carriers will do all they can to pass any excess cost back to the shipper, smaller carriers are definitely feeling the pain associated with the fuel increase and are demanding more for their services.  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.  Shippers must be acutely aware of what percentage of their invoice cost is actual fuel surcharge.”

A recent study from non asset-based 3PL Transplace found that the fuel surcharge was the most common accessorial published by shippers.

Transplace said that the majority of surveyed shippers used a cents-per-mile schedule compared to a percentage based fuel method. And companies using the cents-per-mile schedule mostly target their FSC starting point around the traditional $1.17 to $1.24 range, with 73 percent divided between $.05 and $.06 increments beyond the starting point. The company explained that the trend is towards $.06 brackets, which is a recognition of both the increasing burden of fuel in overall transportation costs and the significant increase in average miles per gallon for truckload carrier’s fleets over the past few years.