Prices for diesel fuel at the pump continue to far exceed the cost of regular unleaded gasoline.
A growing consumer demand for diesel in China, India and Europe has negatively impacted the United States fuel costs, which is heavy on the minds of oil industry professionals and the farmers in need of that resource in Jim Wells County.
Joe Ash, of Hunter Ash Oil Co., Inc., said the United States is just one of several players now bidding on the worldwide crude oil markets. And he points out, as more of the population in China and India trade in their bicycles for cars and trucks that run on diesel, the prices will continue to rise, and the effects will reverberate into other areas of the economy.
The Texas Motor Transportation Association is a leading trucking trade organization in Texas. TMTA President and CEO John D. Esparza said the trucking industry delivers goods exclusively to about 80 percent of communities across the nation.
“Unfortunately, with the crippling cost of diesel, that added expense has trickled down to consumers who are now seeing the cost of milk, eggs and other basic commodities rise,” Esparza said. “For many trucking companies, diesel is now the highest expense they pay, surpassing labor. As owners/operators and companies watch bottom lines dwindle, many have and soon will shut down operations.”
Esparza said that because trucks haul 70 percent of all freight tonnage, and 80 percent of communities receive their goods exclusively by truck, rising fuel costs have the potential to increase the cost of everything that Americans consume that comes by truck.
The trucking industry spent more than $112 billion fuel in 2007, and is on pace to spend $135 billion in 2008 - a record high. That’s up from $106 billion in 2006. Commercial trucks consume 53.9 billion gallons of fuel each year nationally. About 39 billion gallons, or 73 percent, is diesel. The remaining 27 percent is gasoline.
“The price we are seeing reflected at the pump is due to two main factors – surging crude oil prices and increased global demand for diesel fuel. Demand is not falling,” Esparza said. “We’re seeing increased demand both in the U.S. and internationally, particularly in China, India and Europe. “
Fuel production at home is not enough, Ash said, to meet the demands of the market. He also cited the lack of refineries as another reason for the increase. He said the problem is worse elsewhere.
“We’re called the Hub City for a reason, we’re at the center of a lot of South Texas oil and gas production, which is why we’ve seen increases in this area, but not as bad as others in this state,” Ash said. “Starting at George West, the prices are a lot higher than they are here. Distance makes a big difference for us over here.”
Ash said there was no way to speculate as to how long this increasing trend in diesel will continue. He said there will be hiccups in the market here and there, but nothing major that would drastically lower the price.
Local farmers are already facing a tough season because of drought conditions in Jim Wells County, and this summer’s increase in the cost of diesel has hit them hard in the pocketbook, Ash said, where profits have already narrowed.
Another area locally feeling the pinch because of rising diesel prices across the nation is Jim Wells County.
Jim Wells County Precinct 2 Commissioner Ventura Garcia Jr. said his office has seen a dramatic increase in fuel spending in just the first quarter of 2008. Garcia said by the month of April, his office had used 44 percent of its fuel budget.
“We did a lot of work the first quarter, so it might level off from here,” he said.
Garcia’s fuel budget for 2008 is $22,250. Of that amount, 80 percent is spent on diesel. Of his 12 vehicles, only three run on unleaded gasoline.
Garcia said more than likely, he’ll have to move surplus funds from other line items in his budget to the fuel line item, in order to cover the increasing costs. With a constant eye on the budget, Garcia was able to get through the first quarter only using 21 percent of his overall budget. He called fuel prices the “sore thumb” of the county budgets overall.
Garcia said he is hoping prices will level off at some point this year, but he said all indications he’s received so far show that prices will get worse before they get better.
Garcia, with only 68 miles of county roads under his management, runs the smallest of the four precincts.
Commissioner Oswald Alanis, with one of the biggest precincts at 170 miles, has a fuel budget of $75,000, with much of that going to diesel fuel costs.
County Auditor Eladio Gonzalez Jr. said the largest department in the county’s general fund, the Sheriff’s Department, has a fuel budget of $120,000 for 2008, and with prices on the rise, even at whole sale, Gonzalez said, it looks like there will have to be another increase in the budget for fuel in 2009, as there was in 2007 and 2008.
Gonzalez said the county is organizing a special budget workshop in the coming weeks to address the growing fuel issue.