|The real price of diesel is back up to its level during the energy crisis in the early 80s.|
The American Trucking Associations estimates that the US trucking industry will spend $87.7 billion on fuel in 2005—a 33% increase over the $65.9 billion spent in 2004. The ATA increased its earlier estimate of $85 billion issued in September after the government issued new data on fuel consumption.
For many motor carriers, fuel represents the second-highest operating expense, accounting for as much as 25% of total operating costs, according to the group.
Trucking companies are already bracing for the higher fuel cost of ultra low-sulfur diesel (ULSD), scheduled to hit the market in mid-2006. ULSD could add between 5 and 13 cents per gallon to the cost of producing and distributing on-road fuel.
Furthermore, meeting the more stringent EPA emissions standards coming into effect in 2007 will likely result in higher engine prices and rising prices and a greater degradation of fuel economy than expected. (Earlier post.)
The Energy Information Administration (EIA), in its latest Short-Term Energy Outlook, projects that retail on-road diesel prices will average $2.54/gallon in 2006, up 5.4% ($0.13) from this year. (The EIA estimates gasoline prices will rise 6.6% to an average $2.42.)
The EIA estimates that in 2006, total domestic energy demand will increase at an annual rate of about 2.0%, despite continued concerns about tight supplies and projected high prices for oil and natural gas. Prices for crude oil, petroleum products, and natural gas are projected to remain high through 2006 because of continuing tight international supplies and hurricane-induced supply losses.