Diesel prices climb to highest levels in nearly three years

Somewhat quietly, diesel fuel prices have hit their highest levels in almost three years.

The Energy Information Administration (EIA), a Department of Energy unit that posts weekly price updates on various energy sources, reported on Monday that average nationwide on-highway diesel prices hit $2.915 a gallon as of mid-November. That is the highest level since mid-January 2015, when prices hit $3.05 a gallon. Last year at this time, diesel prices nationwide were at $2.44 a gallon.

The EIA divides its data sets into nine regions. One of the regions, California, traditionally reports the highest diesel prices because of heavy state taxes. In fact, on Nov. 1, a round of diesel tax increases took effect that bumped the price up to $3.63 a gallon. This week, the mid-Atlantic region posted average prices of $3.01 a gallon. The Gulf Coast region, generally the lowest because of its proximity to the country's refining infrastructure as well as lower taxes, reported prices of under $2.70 a gallon, on average.

Diesel prices spiked 15 cents a gallon during a one-week period in late August, coinciding with the disruptions to the Gulf Coast energy network caused by Hurricane Harvey. Prices nationwide, on average, hit $2.75 a gallon on Sept. 4 and have been rising steadily ever since.

Depending on prevailing prices, fuel is either the highest or second-highest cost item for a carrier, interchanging with labor. The EIA data forms the basis for fuel surcharges imposed by carriers and paid by truck users. As fuel prices rise, the surcharges take a bigger bite out of shipper budgets. Carriers, meanwhile, will use a complex pricing formula known as a "peg" to effectively arbitrage the difference between what they pay and what they receive in surcharges.

Fuel price fluctuations will also affect choice of transport modes, as higher prices will often compel shippers and third party users to shift traffic to rail service, which is considered more fuel-efficient than over-the-road trucking.

In its most recent short-term forecast issued last week, EIA forecast diesel prices to average $2.65 a gallon in 2017 and $2.83 a gallon in 2018.

Editor's note: An earlier version of this story mis-stated Monday's average nationwide on-highway diesel price. DC Velocity regrets the error.