The national average retail price hit $1.704 on Feb. 17 – the highest level recorded since the Energy Information Administration began tracking prices in 1994. A week earlier, EIA reported the largest one-week increase in average retail diesel prices – 12 cents. Between Jan. 27 and Feb. 17, the average price of diesel jumped 21.2 cents.
Several factors are exerting pressure on diesel prices. For starters, crude oil inventories are very low. Plus, the winter has been severe in the East. That’s important because home heating oil – a common heating method in the Northeast – competes with diesel for the same distillate stocks. Then there’s the two-month-old labor crisis in the major oil-supplying nation of Venezuela. The threat of war with Iraq is also sending prices higher due to fears of a disruption in supply.
The New England and Central Atlantic regions have been particularly hard hit with average diesel prices topping $1.85 a gallon by Feb. 17. The one-week increase reported by EIA for New England on Feb. 10 was 19.1 cents. Especially troubling is the comparison to this time last year. In every region, the average diesel price on Feb. 17 was at least 50 cents higher than a year earlier. At some truck stops in the Northeast, diesel was selling at more than $2 a gallon by mid-February.
“The problem is it’s been going up so fast,” says Roland Bellavance, owner of Bellavance Trucking in Barre, Vt. “It went up 10 cents a gallon Thursday night … on Friday, 10 cents, and on Saturday, 7 cents.” Bellavance says his company hasn’t been able to get surcharges on back hauls, even though it’s been able to get a fuel surcharge on some of its outbound freight. “We’re trying to put a surcharge on anything we can,” he said. “But prices [on backhauls] are dictated to us. Business is slow anyway.”
In a follow-up to a January letter from his predecessor, American Trucking Associations President Bill Graves suggested in a letter to President Bush that a release from the Strategic Petroleum Reserve “may be the best option to avert a potential crisis in the domestic refinery system” due to extremely tight inventories of crude oil.
“Releasing crude from the SPR will help inventories grow and reduce pressure on crude prices, thus lessening the magnitude of a potential price increase should it be necessary to invade Iraq,” Graves said. He also praised Bush for a recent decision delaying delivery of oil to the SPR.