Although they're fluctuating a bit from week to week, diesel prices are at their lowest levels in three and a half years. Was it just last summer when we seemed headed for $5 diesel and $200 barrels of oil?
Not only have we retreated from last year's unprecedented fuel prices, but it looks like these lower ones will be around for a while. The Dept. of Energy's Annual Energy Outlook 2009 predicts that world oil prices will rise only moderately over the next two years, averaging $62 a barrel this year and $82 a barrel in 2010. By comparison, the average barrel price in 2008 was just over $100.
Whenever it comes, recovery in global economies will certainly create price pressures on all oil products, but DOE expects that pressure to be at least partially offset here in the U.S. by a real change in our energy consumption patterns. The report projects “virtually no growth in U.S. oil consumption” through 2030. That's not moderate or slow growth, that's “virtually no growth.” And it also expects a significant decline in imported “liquid fuels” over that same span.
DOE bases its forecast on the new fuel economy standards for light vehicles, new conservation efforts driven by increased oil consumption in other growing economies driving up imported oil prices, and a significant increase in our use of renewable energy sources such as biomass-based diesel and ethanol as well as solar and wind.
This is good news for trucking. Fuel is always at the top of a fleet's operating expenses, and after the pain of 2008, the current low prices offer some welcome relief, especially given the poor economy. But cheaper diesel also presents a potential danger.
At $4 a gallon, fleets were highly motivated to wring out every tenth of a mile per gallon to be found, whether it was in operations, driver behavior or the trucks themselves. It's hard to find the motivation or capital to continue maximum fuel-economy efforts when prices are low.
Backing off now, though, would be a huge mistake. You've learned that even small gains in fuel economy have a large impact on profitability, and you need to keep that lesson front and center for everyone in your fleet. Today's lower diesel prices are giving you a rare window of opportunity to prepare for the future methodically and intelligently, and to avoid the crisis management mentality that gripped so many when prices skyrocketed last year.
Yes, the DOE doesn't expect to see another rapid increase in oil prices in the next few years, but they warn that global demand will again outstrip production once the world's major economies see an upturn, which means prices will inevitably grow.
Then there's the major infrastructure rebuilding we're hearing so much about. Unless there's a radical change in direction, the government is going to rely on even higher fuel taxes to pay for those plans, taxes tied directly to fuel consumption. Pressure to reduce carbon emissions is also building and will likely result in regulation of truck CO2 emissions sometime in the near future.
If you're running the most fuel-efficient fleet you can, using all the tools at your disposal to limit petroleum consumption, you'll be ready for that future. If not, 2008 will seem like the good old days.