Gasoline prices have plummeted, but diesel has declined more gradually for several reasons.
The change in gasoline prices posted at stations each week is like watching a flip scoreboard going in reverse. The average national price of gasoline is $2.40 – 87 cents less than a year ago, according to the U.S. Energy Information Administration. In some areas, gasoline is selling for under $2 a gallon.
But diesel fuel prices have ratcheted down much more slowly to the consternation of motor carriers and other users. Diesel has proven much less volatile than crude oil prices. The EIA’s weekly price survey for last week shows the national average price of diesel fuel at $3.28 per gallon, or 59 cents per gallon less than a year ago.
Why are diesel prices still relatively high?
The United States has a limited amount of diesel refineries and a significant portion of their production is being exported at the same time an improving economy has raised demand from goods movement companies for the fuel, according to a USA Today article.
Diesel is also a distillate that can be used as a fuel oil to heat homes in the winter, further cutting into the available supply for trucks, locomotives, off-road vehicles, heavy machinery and some car models, the newspaper notes.
The decline in oil prices is already benefiting motorists and transportation companies through lower fuel bills, but shippers may have to wait to realize savings because typically there is a lag between the diesel prices decline and motor carriers’ follow-up by lowering fuel surcharges.
Since March, diesel prices have fallen almost 20 percent.
One of the reasons intermodal freight transportation has gained favor with shippers and truckload carriers as a substitute for long-haul truck moves is that railroads are much more efficient and can haul more freight using less fuel. Lower diesel fuel prices would appear to raise the potential for some intermodal users to switch back to truck, which generally can deliver goods at least a couple days faster.
But such a scenario is unlikely because the truckload market remains heavily constrained by a driver shortage.
“I think that fuel would have to be well below $54 per barrel, and perhaps it wouldn’t even happen then,” Tom Finkbiner, chief executive officer of Tiger Cool Express, said in an e-mail exchange. “The truckload problem is much more about driver supply then about fuel prices.
“I can tell you that the intermodal surcharges have gone only from 35.5 percent of revenue to 32 percent, versus a 50 percent drop for crude prices. At this level, we see no change in competitiveness between the modes,” he added.
Tiger Cool Express is a start-up freight management company based in Overland Park, Kan., that uses intermodal containers to ship perishable commodities from various growing regions in the United States to consumption markets.
Diesel fuel price remains less volatile than crude oil
