Diesel, crude oil prices continue to set records

| Monday, April 11, 2005

Thanks in part to growing demand and increased refining costs, prices for diesel fuel continued their horrific upward spiral in all regions of the country April 11, according to the U.S. Department of Energy.

The national average price for diesel rose 1.3 cents per gallon to a record-setting $2.316 per gallon, up from $2.303 the week before. That’s also up nearly 64 cents from the same time period in 2004.

California and the rest of the West Coast were hit the hardest, with the average in both regions rising 4.4 cents per gallon. California’s prices averaged $2.625 per gallon on April 11, while the rest of the West Coast averaged $2.585 per gallon.

Experts say part of the reason for the increase in costs is because of the increase in demand as the summer driving season approaches. Air pollution rules requiring more expensive fuel blends are also a contributing factor.

Another factor that some experts say is often overlooked is U.S. oil refinery production. According to the American Petroleum Institute, U.S. oil refineries are operating at 100 percent of capacity, especially during the summer months. Even that, however, may not be fast enough.

Fox News reported that a new oil refinery has not been built in the United States in 29 years, and people on all sides are pointing fingers at each other. Environmentalists have been working to keep oil refineries from being built, maintaining that they are dangerous to the environment and to the people who work there.

Oil companies, meanwhile, claim that government red tape is the real culprit, Fox News reported, while activist groups such as Public Citizen maintain that the oil companies are refusing to build more refineries so that they can gouge consumers at the pump.

Crude oil prices soar, OPEC mulls increase
But there may be even still another culprit to blame. Increasing demand for crude oil around the world – in particular from China’s burgeoning economy – combined with political turmoil in several key oil producing areas, has driven crude oil prices to record highs, according to media reports.

On the New York Mercantile Exchange, prices for light, sweet crude oil settled at $53.69 per barrel April 11, after hitting a high of $53.80 earlier in the day.

While that was down somewhat from the record-setting highs above $58 per barrel set the previous week, that’s still significantly higher than a year ago, when prices per barrel were in the $35-$40 range.

The Organization of Petroleum Exporting Countries, which produces about 40 percent of the world’s oil, said it might increase its production by 500,000 barrels per day in May to help stem an anticipated surge in demand moving into summer. OPEC also left room for a second increase of 500,000 barrels per day before its June meeting if prices did not drop below $55 per barrel.

Owner-operators, of course, have been the hardest hit by the fuel crunch, with many left wondering just how much longer they can hold out.

One thing that could help them is the fuel surcharge provision currently making its way through Congress. The provision was recently approved by the U.S. House as part of its version of the highway bill. Another version is currently making its way through the Senate.

The language in the House bill at Section 4139 requires all motor carriers, brokers and freight forwarders running truckload freight to implement fuel surcharges and pass on 100 percent of those charges to the person who actually pays for the fuel.

The Owner-Operator Independent Drivers Association is urging truckers to write, fax and call their U.S. senators and urge them to include the same fuel surcharge language in the Senate’s version of the bill.

If truckers are uncertain who their senators are, they can contact OOIDA’s Membership Department, and they will look up the information. The toll-free OOIDA number is 1-800-444-5791.

Truckers can also call the U.S. Capitol switchboard at (202) 224-3121, give the operator their ZIP code and be directly connected to their senator’s office.

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