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$3 diesel in California

Aug. 9, 2005
Last week the average price for a gallon of diesel soared 20.7 cents to $2.801 in the West Coast and 28.6 cents to $2.943 in California

Last week the average price for a gallon of diesel soared 20.7 cents to $2.801 in the West Coast and 28.6 cents to $2.943 in California, after a major refinery there caught fire in late July, according to the Energy Information Administration (EIA).

According to the Oil Price Information Service (OPIS), today California diesel prices stand at $3.003. An OPIS analyst told Fleet Owner that there are indications that West Coast prices may plateau and eventually fall in the coming weeks.

“The markets are starting to calm down behind us,” said Denton Cinquegrana, OPIS markets editor. “The Chevron [refinery] is expected to be restarted closer to the end of this week and that will hopefully help cool the market. It’ll take a little while before [the refinery] gets back to the rates they’re running at—it’ll be maybe another week before supplies start hitting the market.

“On the spot market, prices have been pretty flat,” he continued. “Basically, there are more sellers in the market and that’s a good sign. We saw California prices rise above $3 today. I think we might have seen a short-term peak in diesel prices. The only thing that will help it is when [the refinery] comes back online.”

“Yesterday crude oil prices closed at $63.94 which marks the highest close,” said Doug MacIntyre, senior oil market analyst with EIA, adding that petroleum demand remains high with little extra inventory to “cushion” supply disruptions. This goes especially for California because the cleaner diesel mandated at the pumps is produced primarily in the state itself. “Any glitch in the system is going to send prices up because there’s no slack available to make up for it.”

The national average price rose a much more modest 5.9 cents to $2.407. All regions posted an increase, but the most stable prices were in New England, which posted only a 0.4-cent increase to $2.492. The cheapest region in which to fill up was the Gulf Coast, despite a 4.4-cent hike to $2.323.

Salt Lake City, UT-based C.R. England, which operates 2,600 trucks and 4,000 refrigerated trailers throughout North America, is feeling the impact of the price surge. This is particularly because it is more difficult to recover the cost of fuel that is consumed by reefers, according to a company executive.

“I think that surprisingly, for the larger fleets, their surcharges are taking the brunt of the blow,” said Corey England, vp—operations support for C.R. England. “The bills we were making last week trail those of this week. Conversely, when the price drops you may get benefits. There is some loss on billing based on Monday’s cost of fuel— we understand that happens but when the price drops, you have the opposite result.

“What really hurts refrigerated carriers is the refrigeration fuel,” England continued. “We’ve made an effort to get surcharges to cover that, but that has not gained the wide-scale acceptance of tractor fuel. That’s a huge issue for us and that is obviously one that is impacting us very heavily.

“The equation to calculate fuel surcharges doesn’t take into account reefer fuel surcharges. We’ve made some headway. Every carrier that runs refrigerated equipment feels that pinch and we hope everyone is going to the customer and putting the pressure on. For example, last month $500,000 was uncovered on fuel surcharge on refrigeration fuel,” England added.

For more detailed information on diesel prices, go to www.fleetowner.com/diesel080805.xls.

About the Author

Terrence Nguyen

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