Fleets see first diesel price hike in five weeks

July 8, 2004
The national average price of diesel fuel rose for the first time in five weeks-- by 1.6 cents a gallon, according to the Energy Information Administration (EIA).

The national average price of diesel fuel rose for the first time in five weeks-- by 1.6 cents a gallon, according to the Energy Information Administration (EIA).

But many industry experts feel fleets are managing the high cost of diesel just fine via their fuel surcharge programs. That’s especially so thanks to tight truck capacity leading many shippers to be more accepting of fuel surcharges.

“High fuel prices are still a concern for the trucking industry, because fuel surcharges don’t recoup all of the extra expense,” Kenneth Farer, an analyst with Standard & Poor’s, said. “Fuel surcharges helps fleets keep fuel costs relatively stable, giving them ongoing price protection.”

EIA said the national average price for diesel rose this week to $1.716 per gallon, after declining for over a month, falling to $1.70 per gallon last week. West Coast states, especially California, watched diesel fuel prices climb nearly 4 cents a gallon, according to EIA.

Bob Costello, chief economist for the American Trucking Associations (ATA), pointed out that EIA is forecasting a drop in diesel prices to around $1.65 per gallon by the third and fourth quarter this year. However, that would still mean the price of diesel would be at record high levels.

“High fuel prices are never welcomed in this industry, but how much of an impact they have on a fleet depends on how much they are getting recouped for that expense through fuel surcharges,” Costello said.

Standard & Poor's Farer said that fuel surcharges are translating into a price hike of about 7% for LTL shipments and 14% for truckload freight.

“Fuel surcharges are already a widely accepted practice in this industry,” said Farer. “But add to it the fact that [truck] capacity is so much tighter and you see why most fleets are able to recoup much of that higher fuel cost.”