Fleet Companies Should Keep An EYE On Diesel Fuel Prices

Is your fuel management ready with U.S. diesel fuel prices averaging just below $3.11 per gallon over the last week – up over a dine per gallon in the last month and some 35 cents per gallon higher than the same time last year, according to the Energy Information Admin. (EIA), truck fleet companies should keep a close watch on pump prices as winter weather starts to close in on diesel fuel prices.

Winter is typically the ‘high price season’ for diesel fuel prices, 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 fleet fueling 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 prices 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 from fuel companies and not much fuel savings from last year. Even with the best of fuel cards or fleet card programs, most fleet managers can’t get enough fuel savings when there are major price swings.

“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. Diesel fuel prices for fleet companies were out of control. Most fleet companies were unsure of fleet cards, mobile fueling, fuel cards to use in an effort for fuel savings and fleet fueling controls.

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 with possible much higher diesel fuel prices. But that will depend on a number of factors, including continued strengthening of the U.S. economy, which would drive up fleet fueling use, as well as colder-than-normal temperatures, which would drive up heating oil (made from the same base petroleum stock as diesel) demand. For fuel managers they can’t take their eye off the ball. Yes, diesel fuel prices are going up but you still need to make sure in the winter time that diesel fuel additives are used if not your fleet might not run at all.

“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 diesel fuel prices now,” he stressed. “How the stock and financial markets behave can cause oil prices – and thus diesel fuel prices – to rise or fall.”