High diesel prices...

With all of the stories being written about the increase in gasoline prices lately, it’s only a matter of time before reporters and producers start writing and taping stories about the increase in diesel prices and what that means for the prices of so many products we use every day.

Over the past year, diesel prices have risen even faster than gasoline.  According to AAA, gasoline costs, on average, 4.07 right now, up from 3.00 a year ago.  Diesel costs, 4.77, up from 2.89 last year.  That’s a 65 percent increase!

Think about it:  at this time of the year, diesel fuel is usually cheaper than gasoline, thanks to the price pressures created by the annual peak driving seasons of spring and summer.  That, along with the better efficiency, durability and reliability of diesel engines usually added up to a summertime win-win-win-win for truckers, transit operators and others who relied on diesel fuel and engines.

Now, fuel costs are up by two-thirds to our nation’s truck operators. 

This is really tough, especially in an industry known for long hours, thin margins, and plenty of ups and downs.  (A personal aside:  I spent several summer vacations in high school and college loading and unloading refrigerated trucks hauling meat from the Midwest to New York, so I have some sense of how hard the trucker’s life can be and how little margin there is for dramatic changes in operating costs).

Recently, CNN really blew it by implying that cleaner diesel fuel was the culprit.  They could not have been more wrong.  Sure, today’s ultra-low sulfur diesel fuel is 97 percent cleaner than it was two years ago.  As a result, every diesel truck and bus is operating 5-10 percent more cleanly, and new engines are 90-95 percent cleaner, thanks to new pollution-cutting filters and catalysts that can only use the new fuel. 

But guess what:  there’s no appreciable difference in the price of this cleaner, ultra-low sulfur diesel fuel and the older, higher-sulfur fuel (which you can still buy for farm, construction, and industrial uses).  In fact, you’d see more price differences driving any stretch of U.S. 1 or Route 66 than you’d see between the two diesel fuels. For examples, take a look at the fuel prices at the Flying J nearest you.

So what’s causing the price hike? 

There are a few factors worth noting. Obviously, most of the reasons for high gasoline prices are true for high diesel prices also.  These factors include high petroleum commodity prices; record high profit margins throughout the oil industry; the declining dollar and the increasing trade imbalance; rapidly increasing demand in China, India, and other emerging economies; commodity speculators (and their regulators); and so on.

The diesel story is further complicated by the fast-increasing demand for diesel fuel and other so-called “distillates” (like home heating oil) in Europe, Asia and the Middle East.  In Europe, more than half of all new car sales are diesel-fueled, up from only 28.4 percent of the new car market in 1999 (In the US, it’s about 1 percent.  This market will certainly expand as numerous new diesel cars enter the market in the next few years, which may create even more supply constraints for diesel).  In Asia and Middle East, diesel vehicle sales are surging—especially for the diesel-fueled construction and industrial equipment that is critical to building all of those new buildings, roads, airports, and other huge projects that typify many growing cities in those regions. You can read more about this on the Diesel Technology Forum site.

But, in the meantime, what can a diesel truck or bus operator do?

Just like car owners, truck operators can trim their costs by doing some simple things more often.

First, cutting unnecessary idling should be a no-brainer, for starters.  Every year, unnecessary idling wastes 1 billion gallons of diesel fuel—that’s almost $5 billion wasted, yet recoverable if we cut unnecessary idling. 

Second, keeping tires inflated at the proper pressure and performing regular maintenance is critical to ensuring that diesel engines operate as efficiently as possible.  As with cutting idling, this will save fuel, cut costs and reduce pollution in the long run.

And, of course, investing, whenever possible, in more efficient technologies will be helpful to cut costs in the long run. EPA’s Smartway Transport Partnership offers many more ways to cut fuel consumption, including on the three quick ideas I’ve mentioned above.  This website is a must-look for anybody who want to invest in more fuel-efficient trucking.

In future posts, I’ll detail some key policy options and report on political responses to these higher diesel fuel prices.

Stay tuned.

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