The trucking supply chain will wake up Christmas morning with a big-time stocking stuffer over the fireplace: the lowest diesel fuel prices in four years.
Average diesel prices hit an average of $3.28 a gallon as of yesterday's reading, the Department of Energy's Energy Information Administration (EIA) reported yesterday. That is a near 14-cent-a-gallon drop from the week before, and a whopping 59-cent-a-gallon decline from the same period a year ago, according to EIA data. EIA publishes weekly reports on gasoline and diesel prices as a national average and broken out over regions of the country.
Diesel prices in the Midwest showed the largest week-over-week drop of all regions, coming in at a decline of nearly 18 cents a gallon, EIA data showed. That was followed by the Rocky Mountain states, where prices fell more than 16 cents a gallon. The smallest decline, 4 cents a gallon, was reported in the New England states. The lowest pump price was reported in the Gulf Coast region at $3.17 per gallon, according to EIA data.
The last time average nationwide diesel prices were this low was in the week ended Dec. 20, 2010, when the price was slightly more than $3.24 a gallon.
Fuel is either the largest or second-largest expense for truckers; fuel and labor interchange with each other depending on current fuel prices. For decent-size carriers with hundreds of trucks, a drop of this magnitude is significant. Noel Perry, senior consultant and managing director for consultancy FTR, said a moderate-to-large truck fleet saves .13 cents per loaded mile for every 1-cent decline in diesel prices.
A typical owner-operator who drives 110,000 miles per year and whose truck gets about 6 miles per gallon would save about $183 annually for each one-cent drop in price, according to estimates from the Owner-Operator Independent Drivers Association (OOIDA), the trade group representing independent contractors. OOIDA's membership is around 150,000.
Crude oil prices account for about half of the cost of a gallon of diesel charged at the pump. The rest comes from federal and state excise taxes, and refining, distribution, and marketing expenses. Oil prices have plunged in recent months, with a West Texas Intermediate (WTI) crude priced as of yesterday at $55.26 a barrel, a $44.06 per barrel decline from the same period a year ago, according to EIA data.