WASHINGTON, D.C. -- On highway postings from the San Francisco Bay Area through the Midwest and into the Mid-Atlantic states, motorists were seeing retail diesel prices shatter all-time highs. For the fourth week in a row last week, truckers, commercial drivers and owners of agricultural vehicles nationwide have seen prices push further and further past the $4-per-gallon threshold.
Though regular unleaded prices for gasoline have also hit historic highs, average U.S. diesel prices—for reasons seemingly unrelated to issues of supply—took staggering leaps over the past month. [image-nocss] Prices went from $3.55 in the last week of February to $3.65 in the first week of March. Two weeks ago, diesel prices averaged $3.81, and last week prices averaged $3.97, according to the Energy Information Administration (EIA), Washington, D.C.
“I don 't know of anyone posting under $4, and if they are, it 's like $3.98-point-nine,” Tom Robinson, president of Rotten Robbie, San Jose, Calif., told CSP Daily News. “Gasoline [demand] is soft, so I have to believe diesel is even softer, especially with [declines in] the construction trade [here].”
While demand is now what 's on most retailers ' minds, how various segments of professional drivers will be affected will differ. Independent drivers get hit directly, while larger fleets and transport carriers feel the burden over time because of contracts that are in place that fail to account for spikes in diesel prices.
“Until fleets get a chance to readjust, it takes it a while to even out,” Mindy Long, vice president of public affairs for NATSO Inc., Alexandria. Va., told CSP Daily News. “Things had been bleak, but anecdotally I 've heard that business is picking back up as people adjust rates so they 're making the profits they need to make.”
As of last week, retail diesel prices had risen for five consecutive weeks and hit all-time highs in the last four recorded weeks, according to the EIA. Average street postings in the United States for diesel last week rose 15.5 cents to hit $3.97, which was up from $2.68 for the same period in 2007—a 33% difference.
Regionally, the story gets even more dramatic, with prices in the central Atlantic area averaging $4.17—the highest in the nation. New England came in second at $4.11. Prices on the East Coast overall averaged $4.03—$1.37 higher than the same period last year. California averaged $4.08 as opposed to the West Coast average of $4.01.
Causes for the recent run on diesel prices are seemingly intangible. “We all understand when Hurricane Katrina hit or when refineries are down; we can see a supply issue,” said Long. “But the EIA is saying supply is not an issue. So we have to look at the weak dollar or how investors are finding safety in commodities vs. equities. Clearly prices are high and everyone 's feeling it.”
Volatile prices may be an additional deterrent to any convenience retailer looking closely at investing in diesel pumps, according to Gary Hall, president of travel-center industry consultancy Gary Hall Associates, Medford, Ore.
“A c-store operator who has or is considering three or four diesel pumps out back is in for a real surprise,” Hall told CSP Daily News. “Existing truck stops are making deals [with trucking companies] at cost-minus, and if a c-store operator spends a half a million dollars to invest in multiple diesel islands and related parking and amenities, it will most likely be a disappointment because most truckers just don 't stop and buy diesel on impulse.”
Will there be any respite in this drawn-out run on diesel? Long remains optimistic. “We hope to see things shake back down,” she said. “Truckstops and travel centers play such a vital role in our economy. So much goes through our nation 's highways.”
CSP magazine has been exploring the issue of rising crude-oil prices and its effect on the distribution system through continuing coverage that began with the February 2008 cover story. Look for more on rising diesel prices and the effect on the independent travel-center business, as well as other petroleum-related investigations, in upcoming issues of CSP and CSP Independent.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.