Drop by drop

For six weeks during February and March, the average diesel price soared 73 cents – more than 21 percent. That’s an unprecedented surge in absolute numbers, and it’s exceeded in percentage terms only by the run-up that began just before Hurricane Katrina. As of March 24, the average price of just under $3.99 is nearly 55 cents above the previous record set in late November.

Skyrocketing diesel prices mirror a huge increase in crude oil prices, which have surpassed $110 per barrel in recent weeks. But what’s behind that increase? In a market as dynamic as petroleum, it’s not always possible to divine a simple answer. One clear factor is a weak dollar, but that’s been an issue for some time and is not enough to explain recent developments. Other observers suggest the main culprits are hedge funds and speculators parking money in commodity markets rather than shaky stock markets. Other factors driving up short-term diesel prices could be weather and decreased distillate supplies.

Even in a time when fleet owners have become resigned to high fuel prices, the recent surge is too much to ignore. The American Trucking Associations last month called for a series of steps by the federal government aimed at lowering energy costs for trucking operations and consumers. As ATA notes, higher gasoline prices lower consumers’ disposable income, which depresses spending and, therefore, freight demand. So higher energy prices hurt trucking companies on both the expense and revenue sides of the ledger.

In a March 20 letter, ATA President Bill Graves asked President Bush to release oil from the Strategic Petroleum Reserve (SPR). Although crude oil inventories aren’t the problem, a release from the SPR could halt the growing speculation by hedge funds that is driving up prices, Graves said.

In letters to other departments and agencies, ATA sought a series of other near- and long-term steps, including increasing refining capacity, exploration of Alaska’s Arctic National Wildlife Refuge, a single national diesel fuel standard, increased funding for the Environmental Protection Agency’s SmartWay Transport Program, a 65 mph national speed limit, and measures to make auxiliary power units more attractive financially to truck owners.

ATA isn’t alone in pushing the government for action. For example, the Arkansas Trucking Association last month petitioned its delegation to seek congressional hearings into the factors that triggered the latest surge and possible solutions for stabilizing the economic volatility created by those prices.

The timing may be right to seek federal relief. Hoping desperately to avoid or recover from a recession, the Bush administration seems to have abandoned temporarily the traditional hands-off approach regarding financial markets. Recall that last month the Federal Reserve engineered a takeover of Bear Stearns to prevent its collapse and offered emergency loans to investment banks. Releasing some crude oil from the SPR is hardly in the same league as a bailout when it comes to market manipulation.

ATA’s requests from the Bush administration are reasonable steps toward chipping away at diesel and gasoline costs. You can’t really count on any relief from government, however. Barring direct price controls – an almost inconceivable intrusion into the market – most steps the federal government could take in the near term are of questionable strength to make a dramatic difference. And that assumes the trucking industry can even persuade elected officials that energy costs are truly an economic crisis.

In the end, the burden is yours to operate as efficiently as possible and take every reasonable step to lower your fuel usage and price. Most of all, take every opportunity to pass along higher fuel prices in the form of surcharges. A weak freight environment has led some shippers to resist traditional formulas and try to force through approaches that lower their own costs at your expense. But you can’t give up on a fair and equitable recovery of your costs just to fill your trailers.