The Cost of Diesel is Projected to Keep Rising

By Eric G Braun, Senior Writer, USRW

The price of diesel is projected to cut into carrier profits, as the cost is slowly climbing and is forecasted to keep climbing in 2017. A new Presidential administration keeps us all speculating on what might be in the coming four years.

Payroll is traditionally the highest expense for any company, but in the trucking industry those diesel prices can make the profit margin razor thin. Accordingly, the cost is passed on to the customer all the way down the line, and it hits bottom with the consumer who must pay more for goods and services.

The cost of producing and delivering diesel fuel to customers includes the costs of crude oil, refinery processing, marketing and distribution, and retail station operation. The retail pump price reflects the costs and the profits (and sometimes losses) of the refiners, marketers, distributors, and retail station owners. The relative share of these cost components to the retail price of diesel fuel varies over time and varies among regions of the country.

It's estimated that diesel fuel can account for between 30%-40% of a company's budget. That’s a very high mark for an industry that can struggle trying to find other ways to keep costs down.

Per the U.S. Energy Information Center, the price at the pump also includes federal, state, and local taxes. In 2015, the federal excise tax for on-highway diesel fuel was 24.40 cents per gallon, and the average of state taxes was 24.90 cents per gallon. There was an additional Leaking Underground Storage Tank fee of 1 cent per gallon. As of July 1, 2015, the average of state and local government taxes and fees was 27.24 cents per gallon.

Those of you on the California coast, your air is cleaner and you’re paying the price for it. Diesel fuel prices on the West Coast, especially in California, are relatively higher than other regions of the country because of taxes, supply issues, and the unique specifications for diesel fuel sold in California. At the beginning of 2015, the amount of the federal and state taxes on retail, on-highway diesel fuel in California equaled about 65 cents per gallon. The average for the United States was about 52 cents per gallon.

California has more stringent specifications and requirements for diesel and other transportation fuels intended to reduce air pollution from vehicles. These standards are generally costlier to meet than federal fuel standards.

One factor that will influence diesel prices is that Russia and other non-OPEC producers have cut back production which has had a negative impact on the price of a barrel of oil. Those who lock themselves into a price, called hedging, can either benefit or take a hit with fluctuating prices.

Below is the current update on diesel prices in the different regions of the country and what they were in the past for comparison.

 


11/28/16

12/5/16

12/12/16

Week ago

Year ago

U.S.

2.420

2.480

2.493

values are up 0.013

values are up 0.155

East Coast (PADD1)

2.446

2.499

2.520

values are up 0.021

values are up 0.148

New England (PADD1A)

2.472

2.526

2.547

values are up 0.021

values are up 0.094

Central Atlantic (PADD1B)

2.549

2.602

2.633

values are up 0.031

values are up 0.132

Lower Atlantic (PADD1C)

2.361

2.415

2.429

values are up 0.014

values are up 0.171

Midwest (PADD2)

2.356

2.431

2.446

values are up 0.015

values are up 0.152

Gulf Coast (PADD3)

2.290

2.361

2.371

values are up 0.010

values are up 0.159

Rocky Mountain (PADD4)

2.450

2.457

2.447

values are down -0.010

values are up 0.072

West Coast (PADD5)

2.727

2.770

2.772

values are up 0.002

values are up 0.220

West Coast less California

2.635

2.679

2.690

values are up 0.011

values are up 0.259

California

2.800

2.843

2.837

values are down -0.006

values are up 0.187

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