Diesel keeps setting new highs

By GREG EDWARDS
RICHMOND TIMES-DISPATCH
Published: March 12, 2008

The price of regular gasoline, which tied a national record yesterday, is hogging the headlines, but diesel prices have risen to even more dramatic highs.

Higher gasoline prices hit consumers immediately at the pump. But higher diesel prices eventually are passed along to consumers in the price of everything they buy that is hauled by truck or train, which is to say almost everything they buy.

“Ultimately, all of us consumers will have to pick up the tab [for costlier fuel],” said John Cox, president and chief executive officer of Cox Transportation Services, a nationwide carrier based in Ashland.

The average national price of regular gasoline yesterday, according to AAA, was $3.23 a gallon, tying a record set last May. The national average price of diesel fuel, however, was a record $3.85 per gallon. That compares with $2.73 a year ago.

Diesel, the primary fuel of the trucking and railroad industries, has been setting new highs every day for the past couple of weeks. Diesel sold in Richmond and 12 surrounding localities yesterday averaged $3.77 per gallon, compared with $3.31 last month and $2.63 a year ago.

So diesel costs here have risen 43 percent in the past year, while gasoline has increased 31 percent.

“I can assure you that fuel is the number one problem that we face in this industry,” said Cox, who serves as president of the Virginia Trucking Association.

“For the first time, diesel fuel [which has historically been his trucking company’s second-highest cost] is beginning to outpace our cost of labor,” he said.

Tom Jenkins, chairman of Green Motor Lines Inc. of Richmond, has been in the trucking business since 1951 and says the fuel situation today is worse that the oil embargo days of the early’70s. In years past, prices might increase a penny or two overnight but now will jump a dime at a time, he said.

Cox, Green and other carriers cope with escalating prices by levying fuel surcharges on transportation bills. The charges are based on the average price of diesel published each week by the Department of Energy.

“Without our fuel surcharges, we would be out of business,” Cox said.

Surcharges are the only tool carriers have to cope with higher fuel prices, he said. Because of the economic slowdown, particularly in the auto and construction industries, competition among trucking companies has increased, significantly depressing shipping rates and trucking-company profits, Cox said.

For railroads, however, higher fuel prices may have a tempering effect on cargo losses caused by the slowing economy. Railroads, like trucking companies, use surcharges to deal with rising fuel costs.

Higher fuel prices do make railroads more competitive relative to trucking because trains are a more fuel-efficient form of transportation, said Norfolk Southern spokesman Rob Chapman. However, rail traffic, if not slowing, is at least not growing as fast because of the economic downturn, he said.

In reaction to higher fuel surcharges, some companies are changing their shipping patterns, said Ira Rosenfeld, a spokesman for Richmond-based UPS Freight. Companies that once shipped four days a week might now be consolidating shipments and shipping only twice weekly, he said.

“You have to ship smarter,” he said.

Higher fuel prices also have caused other problems for some carriers—problems not directly related to their businesses.

Jenkins related that fuel trucks have been recently stolen in Northern Virginia and then emptied of the valuable fuel inside.

Contact Greg Edwards at (804) 649-6390 or .