Forecast for fall: Diesel to slip more
Posted on Thursday, August 28, 2008
SPRINGDALE — Diesel is predicted to keep dropping in price this fall as the trucking industry exits a fuel trend that posted record-setting rates at the pump and eliminated many smaller players.
Consumers will still feel the sting of higher retail prices because diesel prices remain higher than a year ago, trucking insiders say.
James Williams, an energy economist who owns WTRG Economics near Russellville, predicted prices at the pump will slide as much as 15 more cents.
The national weekly price of diesel fuel — $ 4. 28 per gallon Wednesday — has tumbled 11 percent since topping out at $ 4. 84 per gallon on July 17, according to AAA data.
“Diesel benefits in two ways,” Williams said Tuesday. Prices go down when “crude oil prices are lower and when the refiner’s mark-up is lower. ’ ’
And with a worldwide deficit of the petroleum distillate getting back to normal, refiners are charging less, Williams said.
“ Diesel prices have reflected crude-oil prices and the shortage of the fuel,” he said. “The refiner’s part of the [pricing problem ] is going away.”
Diesel is up about $ 1. 28 per gallon in the year-over-year comparison.
The fuel powers most semitrucks, buses, trains, ships and barges. “It’s like if wind in a hurricane drops from 140 miles per hour to 130 miles per hour, you’re still in a hurricane,” said Lane Kidd, president of the Arkansas Trucking Association. The Little Rock-based trade group represents about 246 carrier members.
Consumers likely won’t see any quick relief just because fuel dropped 25 cents per gallon, Kidd said.
A consensus in the trucking industry is that the price will settle around $ 4 per gallon for the next several months, which is not good for business, Kidd said.
“If trucking is truly a barometer of what’s to come, then it doesn’t look very bright for the third and fourth quarter,” he said.
Most truckers have taken note of falling diesel prices.
Allen Kuettle said he spotted diesel prices below $ 4 a gallon while on a cattle run that took him to San Antonio.
Kuettle said Tuesday he saw diesel at $ 3. 98 per gallon while driving through Bristow, Okla., which is “ in the middle of nowhere. ’ ’
Diesel prices at some Northwest Arkansas gas stations Wednesday were $ 4. 13 per gallon, below Wednesday’s statewide average of $ 4. 19 per gallon, as reported by AAA.
The decrease is good news for some carriers that can benefit from lagging fuel surcharges, which take effect after the price of diesel exceeds an agreed-on price per gallon. Their amount varies among shippers and brokers.
The drop in price, however, comes too late for other, smaller carriers.
Kuettle, a trucker for Sorrels Brothers Farms in Beebe, said his cousin, an owner / operator, lost his truck recently because he couldn’t make the truck payments.
“ I’m trying to get him a job, ’’ said Kuettle, who took a break at the Pilot Gas Station on U. S. 412 before delivering a load to San Angelo, Texas.
About 970 carriers filed for bankruptcy in the second quarter, according to data from Avondale Partners, an investment bank in Nashville. The high prices will continue to push trucks out of the market in coming months, Justin Yagerman, a transportation analyst with Wachovia Bank in New York, wrote in a research note Tuesday.
To contact this reporter: lwhalen@arkansasonline. com
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