The painful price to keep on truckin'

Diesel fuel hits $4.24 a gallon, up $1.30 in a year

April 19, 2008|By Michael Dresser | Michael Dresser,Sun reporter

For most Maryland drivers, the $4-a-gallon fill-up is still a dire prediction. But for those who depend on diesel to power their trucks and tractors and family cars, four-buck fuel has been a fact of life since February.

AAA Mid-Atlantic reported yesterday that diesel was selling for an average $4.24 - up $1.30 from a year earlier. Regular unleaded was up, too, to a record $3.40 a gallon. But diesel prices have risen at percentages far outstripping the cost of regular gasoline. Last year at this time, diesel cost only 6 cents more than gasoline.

There are many contributing factors, but market forces appear to be the No. 1 cause. Global demand for diesel is growing - more than it has for gasoline - and refinery capacity has lagged behind.

FOR THE RECORD - An article in Saturday's editions incorrectly reported the weight of a typical tractor-trailer. The correct figure is about 80,000 pounds.
The Sun regrets the errors.

The effects of the high cost of diesel are being felt through every sector of the state and national economy: higher fuel prices drive up the cost of hauling everything from beer to baby strollers to market. Food costs, particularly sensitive to the price of fuel, rose 1.2 percent last month as the economy posted some of the worst inflation numbers in three decades.

But the impact has fallen especially hard on people in trucking, agriculture and other sectors for which diesel fuel is the lifeblood.

For Jon McGuirk of Harford County, the diesel run-up has been a double whammy. He and his brother run a small trucking company in Bel Air and his family farms 700 acres in the Thomas Run valley.

"The fuel price is killing us, along with the recession - depression - we're in," he said.

McGuirk said he knows little about the global forces driving the soaring costs. What he does know is that he's getting hammered on the roads and in the fields.

In the trucking business, he said, it's hard for small operators to pass along their increased costs in the form of surcharges. With a weak economy, it's too easy for customers to take their business elsewhere.

On the farm, where his family raises soybeans, corn and hay, he depends on diesel to run "fuel hogs" such as tractors and combines. But there's no assurance that the extra cost of planting will be recovered at harvest time because per-bushel prices will be set by the Chicago commodities markets.

"We can't change corn prices," he said. "You can't go to the guy who's exporting and say: `We want $7.'"

On the Eastern Shore, many farmers face the added cost of using irrigation systems that run on diesel, said Pat Langenfelder, whose family farms 2,300 acres in Kennedyville, Kent County. She noted that the added cost of diesel comes on top of a doubling of fertilizer costs.

Langenfelder, first vice president of the Maryland Farm Bureau, said crop prices are higher but those gains are largely canceled out by the higher costs. She added that farmers don't have the option of cutting fuel consumption unless they shrink their acreage.

"You still need to do the same procedures in order to plant and raise a crop," she said.

According to the Energy Information Administration, both diesel and gasoline prices are governed largely by the cost of crude oil - which has been selling at record levels in world markets. Taxes and refining costs are higher for diesel, but neither can explain the widening gap between the two fuels.

That, according to economists and industry experts, is mostly a function of global market forces. From Europe to Asia to North America, demand for diesel is heavy while supplies are tight.

Ron Planting, an economist with the American Petroleum Institute, said that in recent years more than half the new passenger cars sold in Europe have been diesel-powered. Thus, he said, European refineries are less likely to export diesel than gasoline.

Meanwhile, the thirst for diesel is growing in countries such as India and China, which are making huge investments in infrastructure projects that require diesel-powered equipment.

"They're rapidly growing, industrialized countries," said Tavio Headley, an economist with the American Trucking Association.

For truckers, the impact on what once was their second-largest expense has been significant, Headley said: "Now we're hearing that diesel is equal to labor as the largest expense."

Louis Campion, senior vice president of the Maryland Motor Truck Association, said a typical tractor-trailer might weigh 800,000 pounds and get 6 miles to the gallon. The trucks often carry two saddle tanks with a combined capacity of 250 gallons, he said.

"Filling up from empty, you're paying in excess of $1,000," he said.

Campion said the bigger trucking companies have largely been able to add fuel surcharges. But smaller companies, without the market power to make them stick, in many cases have had to eat much of the added expense. Some smaller carriers have simply parked their trucks, he said.

Bill Colfelt, owner of Colfelt Transport in Westminster, said his dump truck is still on the road despite a 60-cent increase in the price of diesel over a three-week period. But he said he has had to add a fuel surcharge.

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