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Truck fleets best keep eye on diesel fuel prices

Nov. 8, 2010
With U.S. diesel fuel prices averaging just below $3.06 per gallon over the last week – up over a nickel per gallon in the last month and some 25 cents per gallon higher than the same time last year, according to the Energy Information Admin. (EIA), truck fleet owners should keep a close watch on pump prices as winter weather starts to close in

With U.S. diesel fuel prices averaging just below $3.06 per gallon over the last week – up over a nickel per gallon in the last month and some 25 cents per gallon higher than the same time last year, according to the Energy Information Admin. (EIA), truck fleet owners should keep a close watch on pump prices as winter weather starts to close in.

“Winter is typically the ‘high price season’ for diesel, and we’ve seen diesel prices inching up over the last month or so,” Denton Cinquegrana, editor-- west coast spots for the Oil Price Information Service (OPIS), told FleetOwner. “Now, demand for diesel is still way off from pre-recession levels, but it’s getting better slowly – mirroring the slow recovery of the U.S. economy overall.”

Diesel fuel is also benefitting from what’s been dubbed “range stabilization” in terms of crude oil pricing this year, Cinquegrana added. He explained that the price of oil has stayed within a rough $17 range spread between $70 on up to $87 per barrel.

“To be in that range for an entire year is markedly more stable compared to the trend over the last five years as a whole, where we watched oil prices jump from $40 up to $150 per barrel in the summer of 2008 alone,” he pointed out.

However, for oil prices to have “calmed down” for such a long period could mean they are ripe for a breakout this winter, he cautioned. But that will depend on a number of factors, including continued strengthening of the U.S. economy, which would drive up diesel use, as well as colder-than-normal temperatures, which would drive up heating oil (made from the same base petroleum stock as diesel) demand.

“Oil pricing is also much more in line with the equity markets now and far less subject to traditional supply-and-demand pressures,” Cinquegrana pointed out. “Oil prices – and the prices of the fuels refined from it – now react more and more to other economic trends than just to pure supply-and-demand factors.”

For example, he said, a fleet owner might see that diesel fuel inventories are high, yet be paying five cents more per gallon than the week before. That price hike might be largely in response to a run-up in the stock market, or a positive jobs report, or any other financial information that causes the equity markets to move higher, Cinquegrana explained.

“That’s why truckers need to take a ‘macro-economic’ view of fuel pricing now,” he stressed. “How the stock and financial markets behave can cause oil prices – and thus diesel costs – to rise or fall.”

About the Author

Sean Kilcarr | Editor in Chief

Sean previously reported and commented on trends affecting the many different strata of the trucking industry. Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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