'Ternt Just Texas
Gas is getting cheaper, so why are diesel prices so high?
By Brad Foss / AP Business Writer
WASHINGTON -- Although gasoline has become more affordable since the start of summer, diesel and jet fuel prices are climbing steadily higher as autumn approaches, pinching truckers just as seasonal demand picks up and delivering a financial pounding to the already weakened airline industry.
Homeowners who heat with fuel oil also could face a big jump in their bills this winter. And the small but growing number of U. S. motorists who drive diesel-powered vehicles are shaking their heads in astonishment at the price, since many were attracted to these cars and pickup trucks because of their relative cost advantage.
Retired airline pilot Jerry Puckett of Salt Lake City, Utah, said he used to save 20 to 30 cents a gallon when he filled up his diesel-powered Ford F-250 truck. But as he paid $1. 93 a gallon at a Salt Lake City Flying J gas station on Thursday, he’s noticed that the price of diesel fuel isn’t going down.
“Boy, and I would like to know why,” he said. “I have no idea what’s going on. ”
The average nationwide cost for diesel fuel has risen 27 percent in the last year to $1. 87 a gallon, according to the Energy Department. Unleaded regular gasoline costs about the same -- averaging $1. 85 per gallon across the country -- but that is down about 10 percent from a peak of $2. 06 a gallon in May as fears that refiners wouldn’t be able to keep up with demand never materialized.
Gasoline, diesel and fuel oil are refined from crude oil, which at roughly $45 per barrel has surged more than 60 percent in price in the last year. But because demand for diesel fuel continues to rise, in this case from trucking companies and other commercial users, the pricing pressure on that product has intensified.
Diesel prices are rising globally, analysts said, and that is influencing the domestic market. For example, rising demand and prices in Asia gives European refiners a financial incentive to send fuel to China, limiting the amount that is available for the United States to import. And analysts also suspect that a significant portion of the diesel produced in the United States is being sent to Europe, where prices are higher, further tightening domestic supplies.
“Our estimates are that exports are soaking up an additional 200,000 barrels per day or so of U. S. diesel, perhaps about five percent of U. S. demand, but the evidence is anecdotal,” said Tom Kloza, director of Oil Price Information Service, a Lakewood, N. J. provider of industry data.
Economic growth in the United States has lifted over-the-road shipping demand by about 4 percent this year, mainly from the manufacturing and retail sectors, according to the American Trucking Associations. That has delivered higher earnings to the trucking industry. But the high price of diesel has also forced hundreds of tiny trucking companies out of business, while squeezing the profit potential of larger players.
The biggest financial wallop resulting from higher prices of so-called distillate fuel, which includes diesel, jet fuel and heating oil, has been on the airline industry. Two of the nation’s largest carriers, UAL Corp. ’s United Airlines and US Airways Group Inc. , are in bankruptcy court and a third, Delta Air Lines Inc. , is teetering on the brink of a Chapter 11 filing.
The turnaround plans at these carriers require either layoffs, labor concessions or some combination, but union officials complain that the burden of high energy prices has been unfairly placed on their members’ shoulders.
“We’re not the problem. Fuel prices went up,” Duane Woerth, president of the Air Line Pilots Association said in a recent interview. “We can’t help that. ”
The spot price of jet fuel averages about $1. 35 per gallon in New York, roughly 80 percent higher than a year ago. The surge is in part due to the rise in air travel demand but also because jet fuel’s chemical makeup is similar to that of diesel fuel, meaning prices generally move in the same direction.
Within the trucking industry, the price surge has hit mom-and-pop companies the hardest, forcing at least 550 of them out of business in the first six months of the year, industry officials said, adding that the count does not include so-called independent owner-operators with fewer than five trucks in their fleets.
While that is far fewer truckers to be forced out of business than in prior years -- an estimated 250,000 trucks were repossessed between 2000 and 2002 -- officials said it is nonetheless noteworthy given the improvement lately in the U. S. economy.
“Owner operators are in a less-than-advantageous position overall in that they seldom deal with the shipper or whoever is paying the freight bill,” said Todd Spencer, executive vice president of the Owner Operator Independent Drivers Association, a Grain Valley, Mo. -based trade group with more than 110,000 members.
“They work through transport intermediaries, or freight brokers,” he said, “and quite often those entities will assess a fuel surcharge and elect to keep some of it, and sometimes all of it, and not pass those revenues through to the driver, who actually bought the fuel. ”
In contrast, the nation’s large shipping companies, which have thousands of trucks in their fleets, have fared better -- and some very well -- in the current environment because they’ve been able to pass through a major chunk of their rising fuel expenses to customers.
Stock prices of some major trucking companies, such as Yellow Roadway Corp. and J. B. Hunt Transport Services, are up sharply this year due to strong demand. Demand is so strong, in fact, that the industry, which has a notoriously high employee turnover rate, is having difficulty hiring and retaining enough drivers.
“This year, fuel surcharges seem to be much more prevalent than we’ve ever seen,” said Bob Costello, chief economist for the American Trucking Associations. “Does that mean that high fuel prices are a windfall for the industry? Absolutely not. ”
One of the big worries for the trucking industry is the weather this fall and winter. If temperatures are below normal, that will drive up demand for heating oil, possibly leading refiners to scale back on the percentage of diesel fuel they produce from each barrel of oil.
“We might either have to import more diesel or heating oil, which would raise the costs a little bit,” said Aaron Brady, an associate director at Cambridge Energy Research Associates in Cambridge, Mass.
Homeowners in the Northeast and Midwest may get hit harder than usual even if temperatures are in a normal range. Analysts say homeowners using heating oil might spend anywhere from $200 to $500 more this winter, assuming they burn about 1,000 gallons during the season.
It’s an expensive hassle for homeowners to switch from fuel oil to natural gas, if it’s available. For buyers of diesel vehicles, though, the lure of cheaper fuel costs had been a positive until recent months.
Sales of diesel-powered automobiles and light trucks in the United States have nearly doubled in the past six years, rising from 1. 8 percent of sales in 1998 to 3. 4 percent in 2003 and the first half of this year, according to market research firm J. D. Power and Associates.
M. L. Beard of Tacoma, Wash. , drives a 1986 Mercedes station wagon and said she doesn’t worry about the stickiness of high diesel prices.
“I don’t pay attention because, guess what, I have no choice,” she said.
Beard said she likes her car but probably will not buy another diesel vehicle because of the pollution. Still, she’s considering cars that operate on biodiesel, a cleaner-burning, renewable alternative fuel, that can be produced from any fat or vegetable oil.
Attention: TDR Forum Junkies 
Went from $2. 19 around noon, to $2. 40 a couple of hours later.
