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The industry, which has struggled with seasonal jumps in fuel costs in recent years, is back at it as diesel fuel prices have steadily increased since June.

Moderately higher fuel demand and constrained supplies are expected to increase prices further, almost certainly through the fourth quarter — if not into the new year. This sets up a challenge if you’re looking to mitigate rising costs. And it comes at a time when consumers are rethinking shop- ping behaviors in light of their own financial challenges.

hile the average price for diesel fuel nationally was $4.63 for the week ended Sept. 18, it ranged from $4.35 on the Gulf Coast to $6.19 in California.

$4.63/GALLON AND RISING!

The federal Energy Information Administration (EIA) put the national average for a gallon of diesel fuel at $4.633 for the week ended Sept. 18, 2023, down 33 cents from Sept. 19, 2022, but on a steady uptick since this June. Growing concerns about the potential for diesel to go higher have been tied mainly to decisions by Saudi Arabia and Russia to extend production cuts through the end of 2023. This comes even as inventories of distillate fuels, which include diesel and home heating fuel, were down by 16% in August compared to the 10-year seasonal average.

Josh Tippin, vp of fuels and energy services, Penske Transportation Solutions, Reading, Pa., says an inability to produce enough refined diesel will lead to price increases. He points to EIA’s projections that prices will likely fall in the $4 to $4.50 range next year.

“The $4.00 to $4.50 number is conservative, assuming all things are equal,” Tippin says. “We’re running between 92% and 94% refinery utilization, which means we can’t make any more refined product if we want to. That means we have to import more to feed the demand.”

John Gaudet, CTB, vp, of business development for RLS Logistics, Glassboro, N.J., expects diesel prices to continue climbing through the balance of 2023 and into 2024.

“America consumes about 20 million barrels a day of oil and produces about 13 million, much of which gets exported,” says Gaudet. “Unfortunately, I don’t see oil prices coming down anytime soon, and will probably be the talk of 2024.”

Gaudet says that predictions of a colder-than-normal winter, if proven prescient, may create competition for refining capacity between diesel fuel and home heating oil. He also thinks the federal government is limited in what it can do to supplement the nation’s supplies and keep prices down.

Kroger was the first to come on board, ordering the hybrid unit for its fleet and committing to being the pilot customer for fully electric transport refrigeration units.

The United States tapped into the strategic petroleum reserves in 2021 to combat the rising fuel prices. Since then, our strategic petroleum reserves have decreased from about 640 million barrels to 350 million barrels, Gaudet says.

But Tippin and Gaudet are optimistic about the ability of the industry to address current challenges after successfully navigating similar situations in recent years on the pricing and supply chain sides.

Tippin, who says “stress creates innovation,” believes companies have become more re- sponsive from a pricing perspective to protect margins. “Historically, there was a wait-and-see mentality. Now, it’s ‘I can’t really afford to wait and see,’” since smart businesses have made those adjustments.

Gaudet is a big believer in trading partner collaboration. “These past few years have taught us to be prepared for anything, so I feel that the lessons learned will have a lasting impact. Retailers and CPG companies worked well together to adjust their contracts to support one another. The hard work has paved the pathway for any future volatility that may come our way,” he says.

ays to increase fuel efficiency include low-resistance tires, lift-axles on trailers, trailer tails and auxiliary power units.

Rising fuel prices reinforce the need to follow best practices regarding investments in both human and physical resources. Driver training is critical in achieving greater fuel efficiency by reducing idling times and other practices like lowering top-end speeds on the road.

Experts who subscribe to the ‘you treasure what you measure’ theory recommend making use of telematics or other systems to track and provide feedback to drivers.

Experts who subscribe to the “you treasure what you measure” theory recommend making use of telematics or other systems to track and provide feedback to drivers with the goal of continuously improving their personal performances.

There are plenty of present opportunities and others on the horizon that can help you get more per mile out of your fleets. Smart operators “are chasing down the last bit of efficiency they can gain from their equipment by turning it over faster and keeping newer equipment. Newer equipment is always going to be more efficient than older equipment,” says Tippin.

“Preventive maintenance is an expense upfront, but it’s a reduction in the long run. Fleets that take shortcuts find themselves paying more in the long run. Keeping your fleet maintained properly is going to pay dividends even though it’s an upfront cost,” Tippin adds.

There are opportunities to increase fuel efficiency through equipment upgrades such as low-resistance tires, lift-axles on trailers, trailer tails (to reduce drag) and auxiliary power units. It’s also possible to see improvement by focusing on trip planning using increasingly sophisticated software programs. Coordination between trading partners is critical to reduce expenses at warehouse facilities.

Gaudet says that while the industry has learned a lot in recent years and made adjustments for the better, more can be done. “We still witness long unloading delays at grocery warehouses, which result in increased idle and reefer running time,” he notes.

Other experts suggest deploying hybrid vehicles or those that use alternative fuels such as natural gas to reduce exposure to swings in the diesel market that are primarily the result of production quotas set by nations outside the United States.

Gaudet says it’s worth keeping an eye on the joint venture between Horstmar, Germany-based Schmitz Cargobull and Utility Trailer Manufacturing Company, City of Industry, Calif. The venture, Cargobull North America (CBNA), was announced at the International Foodservice Distributors’ Association Solutions Conference in September in Fort Worth, Texas.

KROGER PILOTS NEW TRUs

CBNA is rolling out two new transport refrigeration units (TRUs) — a hybrid unit and an all-electric, that meet the California Air Resources Board (CARB) emissions requirements. The units are expected to deliver up to 20% reductions in fuel consumption. Kroger was the first to come on board, ordering the hybrid unit for its fleet and committing to being the pilot customer for fully electric transport refrigeration units.

“What will be necessary to watch is how the current cold supply chain infrastructure pivots to support these advancements,” says Gaudet. “As we develop new space, we need to consider the future use of the space as it relates to technology to reduce the overall carbon foot- print.”