OPIS: Retail diesel prices expected to escalate

By OGJ editors

HOUSTON, Apr. 22 -- Trucking fleets may face a budget-busting surprise in the next few weeks because wholesale diesel prices are spiraling along with rising gasoline prices.

The wholesale diesel price advances have yet to be passed down to the retail pump. Distillate demand has been phenomenal at a time when it should be waning, said Ben Brockwell, senior analyst at Oil Price Information Service (OPIS), Lakewood, NJ.

"We're coming off of a winter of record consumption. Part of the problem stems from sky-high natural gas prices," Brockwell said. "It was more economical for utilities to switch to diesel, and that put a giant dent in distillate inventories."

The start of the planting season has put even more stress on supply. California and Midwest diesel inventories are at alarming levels. In April, Los Angeles wholesale prices are up 50% to $1.50/gal.

"Although high diesel prices don't attract the same angst as high gasoline prices, the result could mean less money for consumers. Trucking companies will need to pass the increased costs onto their customers with surcharges, which will mean higher prices on everyday goods. And, most fleet executives insist surcharges never cover additional overhead, so their bottom lines suffer," Brockwell said.

Experts predict that the next several years will see violent price swings for petroleum products, and the only way for trucking companies to survive is to manage their risk effectively, he added.