Diesel prices rise another 15.5 cents to $3.871 per gallon, says EIA

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By Jeff Berman, Group News Editor
March 08, 2011 - LM Editorial

On the heels of a 14.3 cent weekly gain, diesel prices saw their single highest weekly increase since May 2008, with a 15.5 cent bump to $3.871 per gallon, according to data from the Department of Energy’s Energy Information Administration (EIA).

On an annual basis, diesel prices are up 96.7cents.

Diesel prices have gone up for 14 straight weeks for a cumulative 60.9 cent gain, coupled with prices being above $3.40 per gallon for the eighth straight week. Current prices are at their highest level since reaching $3.659 the week of October 13, 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.

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.

Oil barrel prices are trading at $103.33 on the New York Mercantile Exchange as of press time and hit $106.95 yesterday, reaching its highest level since September 2008.

The EIA is calling for 2011 crude oil prices to hit $101.77 per barrel, according to its recently-revised short-term energy outlook. This is above a previous estimate of $93.26 per barrel for 2011. On the diesel side, the EIA is calling for the price per gallon of diesel in 2011 to average $3.81, up from a previous estimate of $3.43.

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.

What’s more, White House Chief of Staff Bill Daley said on NBC’s “Meet the Press” on Sunday that tapping the country’s Strategic Petroleum Reserve to curtail the current run-up in crude oil and diesel prices.

“We’re looking at the options,” said Daley. “The issue of the reserves is one we’re considering. It is something that only is done—has been done in very rare occasions. There’s a bunch of factors that have to be looked at, and it is just not the price. Again, the uncertainty—I think there’s no one who doubts that the uncertainty in the Middle East right now has caused this tremendous increase in the last number of weeks.”

The American Trucking Associations recently called on the White House to open up the Strategic Petroleum Reserve and stop blocking access to U.S.-held energy assets.

ATA Vice President and Regulatory Affairs Counsel Rich Moskowitz testified on behalf of the ATA during a Department of Interior hearing last month on the agency’s five-year plan for offshore oil and gas production that opening up the SPR would is supported by the ATA, because the trucking industry requires more than 34 billion gallons of diesel to deliver essential commodities like medicine, food, and clothing, and despite advances in alternative energy, the trucking industry will continue to depend on traditional diesel fuel for the foreseeable future.

“Until U.S. policymakers promote the development of domestic sources of energy, like those on the Outer Continental Shelf, America’s consumers and truckers will become more dependent on sources of foreign oil,” Moskowitz said. “Rising fuel prices hurt truckers twice - first by increasing their operating costs and then by reducing freight volumes as consumers spend more on energy and are forced to reduce their spending on other consumer goods.”

And 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.

However, 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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About the Author

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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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About the Author

Jeff Berman, 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. Contact Jeff Berman.

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