Diesel prices fall to lowest level since 2009

There used to be sticker shock when comparing the price of gasoline and diesel fuel.

Well, not anymore.

Diesel prices have fallen to their lowest level since 2009, with the national average price Friday at $2.56 a gallon, only 14 cents higher than what motorists were paying for unleaded gas, according to the AAA Fuel Gauge Report. The same gallon of diesel a year ago cost $3.80 a gallon.

The spread between the national average price for gasoline and diesel has been no more than 20 cents a gallon since May. The last time the price difference was so close was in May 2011, said Will Speer, a senior petroleum analyst with GasBuddy.com.

“The prices of unleaded and diesel have been so far apart that people have a pre-conceived notion that it [diesel] is not affordable, but now the spread has come in so much it is changing their minds,” Speer said. “We’re talking huge savings.”

Farmers and ranchers are noticing the difference, and while analysts expect the price to tick up a bit when the harvest season begins in earnest this month, they still expect to pay less this year for what are often referred to as the “Three Fs” — feed, fuel and fertilizer.

For the first time since 2009, the USDA is predicting that total costs for farming will decline, a drop largely fueled by the drop in diesel prices, said Jim Sartwelle, a Texas Farm Bureau economist. The USDA predicts the agriculture sector will spend $60 billion — or about $1.5 billion less — after seeing those prices rise 8 percent annually from 2010 to 2014.

“We’re at a point where we are feeling pretty good about fuel prices across the board,” he said.

Diesel prices, like those for gas, are tied to the price of a barrel of crude. Oil prices last week dropped more than 20 percent from their highest point in June on the news that OPEC planned to maintain its output and U.S. crude oil stockpiles remained above the five-year seasonal average.

But while there has been a lot of publicity about lower gas prices — the Labor Day weekend prices are expected to be the lowest since 2004 — diesel is a “different beast,” Speer said.

Gas prices usually go up in the summer, when the demand is higher, and don’t decline until after the Labor Day weekend. Beginning in September, refineries also switch to a gasoline blend that is cheaper to produce, adding to the price drop.

Diesel is linked more closely to the agricultural seasons. Demand and prices go up from March to May, when farmers are planting, then flatten out during the summer as they wait for the harvest from September to November.

“Farmers are either plowing to keep the fields clean, planting to grow a crop, or fertilizing and spraying chemicals before harvesting,” Sartwelle said. “Every one of them involves a tractor that has to be filled with diesel.”

Another major diesel consumer is the trucking industry, which has seen the price decline 17 cents a gallon in one month, said John Esparza, president of the Texas Trucking Association. For independent operators, which make up about half of the truckers on the road, the benefit is immediate.

“He’s paying his own meal ticket. He feels that directly in his pocket,” Esparza said.

Trucking companies buy bulk amounts of fuel and are getting even greater discounts, but because diesel prices tend to be volatile, companies will tack on a fuel surcharge to the base rate for shipping to cover higher costs. Those surcharges are calculated weekly and monthly, he said.

“Truckers adapt to fluctuations in fuel prices. You think that low prices will be great for the trucker, but you can’t bargain on that. It will change,” Esparza said.

Just like with gasoline, the price for diesel will vary widely. During one trip he took last month, Sartwelle said the price for a gallon of diesel ranged from $2.24 to $2.79 between Paris and Dallas. Then, a certain gas station with a beaver as a mascot in Terrell was selling it for $1.99.

“I think we’re going to continue to see these prices hang out where they’ve been. It is a good spot to find ourselves in,” Sartwelle said.

This story was originally published September 7, 2015 at 3:20 PM with the headline "Diesel prices fall to lowest level since 2009."