Sustained Dip in Diesel Prices

Diesel prices headed south for the fourth straight week, according to the Department of Energy’s Energy Information Administration (EIA).

The average price per gallon fell 4.1 cents—matching last week’s decrease—to $4.006 per gallon. These matching declines were preceded by 4.2 cent and 2.9 cent drops, representing a cumulative 15.3 cent drop over the last four weeks.

Prior to four weeks of declining prices, diesel prices rose a cumulative 26.5 cents over a six week span.

During the week of February 25, the average price per gallon hit $4.159 per gallon, which marked the highest point for diesel prices since hitting $4.207 per gallon the week of August 18, 2008. The preceding week’s tally of $4.157 from the week of February 18 was the previous high point, topping the then-recent high of $4.116 from the week of October 22.

On an annual basis, the average price per gallon is down 14.1 cents, compared to recent annual spreads of 9.5 cents, 3.5 cents, and 3.6 cents, respectively.

Earlier this month, the EIA updated its short-term energy outlook. It is now calling for diesel prices to average $3.90 per gallon in 2013 (down from $3.92) and $3.80 in 2014 (down from $3.82), with WTI crude oil now pegged at $91.92 in 2013 (up from $92.81) and the 2014 forecast remaining unchanged at $92.17.

Regardless of the fluctuation in diesel prices, shippers are cognizant of the impact diesel prices can have on their bottom line—for better or worse.

And they continue to be proactive on that front, too, by taking steps to reduce mileage and transit lengths when possible as well as cut down on empty miles.
And even through shippers want to adjust budgets in order to offset the increased costs higher fuel prices bring, it is not always an easy thing to manage.

The focus from a supply chain management perspective, according to shippers, is more on utilization and efficiency by doing things like driving empty miles out of transportation networks.

Shippers have told LM that adjusting budgets is only part of the solution when it comes to dealing—and living—with fuel price fluctuation.

This was evident in the results of a recent Logistics Management reader study, which polled 420 respondents on their diesel spend.
Nearly 16 percent (15.5) of respondents said that their average fuel surcharge is less than 5 percent above base rates, and 13.8 percent said it was 6-to-10 percent higher. And 14.5 percent said it was 11-to-15 percent higher, with 11.9 percent indicating it was 16-to-20 percent higher. More than 30 percent—33.3 percent—said it was more than 20 percent higher, and 11 percent said they were unsure.

When asked if they expect to pay higher fuel surcharges in the coming months, 39.1 percent of the LM survey respondents said yes, with 44.1 percent saying they did not expect to, and 16.8 percent unsure.

And if fuel prices rise in the coming months, 67 percent said they would raise or adjust their freight budgets to cover higher than budgeted for fuel prices and 33 percent saying they would take no action.

The average price per oil is currently $95.26 on the New York Mercantile Exchange at press time. Various reports said that price was high due to today’s durable goods report for February, which increased 5.7 percent annually to $232.1 billion.

EIA officials said that positive economic indicators, including upward revisions in estimates of Chinese GDP growth and continuing employment growth in the United States, could lend support to higher prices, but over the past week they have been counterbalanced by renewed uncertainty regarding economic growth in Europe.

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