SONAR Indices & Insights: Measure diesel fuel price volatility and market impacts with FUELS and ULSD rack data

diesel fuel price ULSDR and FUELS.png

Each week, you’ll learn about another index found within SONAR, the freight forecasting platform from FreightWaves. This week, learn how freight market participants, especially trucking carriers, rely on both the Ultra-Low Sulfur Diesel Rack (ULSDR) data index and the FUELS index to measure diesel fuel price volatility and to understand its impact on their operations and the freight market at large. In this article, you learn what are the ULSD rack data and FUELS indices, who in the freight market relies on these indices, what the indices tell freight market indices, and a real-world scenario analysis of using these two diesel fuel-related indices to better understand the freight market and what actions freight market participants may make from the insights gleaned in these two indices.

What are the ULSDR data and FUELS indices?

ULSDR data index

The Ultra-Low Sulfur Diesel Rack (ULSDR) Data Index is a daily index that measures the average daily wholesale rack price for ultra-low sulfur diesel, calculated daily in $/gallon. This data is also available on the regional level set by airport code. FreightWaves provides its SONAR clients with an extensive series of data on the wholesale price of diesel. The actual physical facilities where diesel and other fuels are dispensed to wholesale customers are known in the industry as the “rack.” Prices set by suppliers at those facilities are therefore known as “rack prices.” SONAR provides daily updates on dozens of specific markets as well as a national average price.

diesel fuel price diesel truck stop actual price per gallon


The chart above shows how the national average price of diesel can be compared to a specific city or regional price. For example, ULSDR.CHI shows the average wholesale price of diesel in the Chicago market while ULSDR.USA shows the average wholesale price of diesel nationally. Different companies in a specific market will publish different rack prices (though the differences tend to be minimal). The local price is an average of those various prices.

Rack prices are driven by three main components. The first is the commodity price of ultra-low sulfur diesel (ULSD) on the CME commodity exchange. The second is the differential between that price and the price of the key spot market from which a local market is supplied. For example, the Atlanta market is supplied with diesel by Colonial Pipeline, which runs from the Houston area to the New York region. The Gulf Coast spot market is therefore a key component in setting the Atlanta rack price. Third, there can be competitive issues in a local area that will impact the rack price.

Rack prices set the general trend for retail prices. The correlation is not perfect, nor is it immediate. But over time, the rack price paid by a retailer to supply its retail outlets needs to be reflected in the price at the pump. If the retail price is too low relative to the rack price, the sale of retail diesel can become unprofitable. If the retail price is too high relative to the rack price, it’s likely a competitor to the retailer can step in, supplied by fuel at a price significantly lower than the retail price, and grab market share.

The chart below is a heat map of a series of ULSDR prices a SONAR client may choose to follow, depending on its fuel-buying needs. The chart can be customized to follow the cities that are important to your company.

diesel fuel price diesel chart

SONAR TreeMap: DTS.USA – One Month Change


The retail to wholesale fuel spread (FUELS) index is a measure of the difference between rack prices, as found in the ULSDR data, and the retail price found in the Diesel Truck Stop Actual Price per Gallon data. It can be found for all areas where both sets of data are available. It is a straight arithmetic formula that subtracts the rack price from the wholesale price. It is in $/gallon. This data is also available on the regional level set by airport code. This spread is particularly important to trucking company profitability. The ability of companies to capture their retail fuel costs relative to the rack price is important. During volatile times, a big difference in these prices can result in fuel surcharges being inadequate or conversely a windfall, since the DOE retail price is a function of retail prices and wholesale prices.

How does each freight market participant use the USLDR and FUELS indices?

The entire trucking sector has an interest in the trends around diesel fuel price data, with individual markets of interest to those who buy fuel in those regions.

USLDR and FUELS will help SONAR users understand the changes in the freight market around diesel fuel prices and how fuel prices may impact freight prices and indicate potential capacity challenges. When a market experiences change in USLDR and FUELS it can aid the freight market participants in the following ways:

  1. Carriers: Although retail prices do not move in lockstep with rack prices, over time, there will be a correlation. Carriers can observe wholesale rack prices to get a sense of what direction prices are heading. The SONAR charts also can help identify anomalies where a wholesale diesel market is moving up or down at a faster rate than national or regional averages. Fuel-buying decisions can be more efficient with that knowledge.
  2. Brokers: A broker is going to be exposed to the price of fuel in much the same way a carrier is. The price of fuel will impact the price that the broker pays to acquire freight that needs to be moved, as well as obtaining the price of capacity to get it to its destination. Knowing the fuel price trends in various markets aids that process considerably.
  3. Shippers: In what direction is the fuel surcharge, one of the many accessorial charges, going? This data series will be your best barometer. But there also are some fuel surcharges that are set to rack prices rather than to the DOE/EIA average retail weekly diesel price. The data in SONAR can provide an easy visual look at where those prices are going.

For those companies and individuals with exposure to diesel fuel price, but that are not going to be following all of the various components of how those prices got to where they are, the ULSDR data index is a perfect barometer. First, it fluctuates almost daily. If there is movement in the commodity market on CME or the individual regional physical spot markets, like in the Gulf Coast, there’s going to be movement in the rack price. Retail prices, by contrast, may signal an “all-in” number but tend to move far more slowly. Just getting the price of ULSD on CME doesn’t tell you anything about individual market conditions in cities from Savannah to Spokane. But the rack price does. If you want to know more about fuel markets than just simply what’s the number at the pump, knowing rack prices, but using the ULSDR data index is a must. And for deeper insights, when using USLDR data in conjunction with FUELS, carriers, especially, are able to determine profitability with a more confident prediction as they have access to the best data on diesel fuel price the market has to offer.

How freight market experts used USLDR index & FUELS to measure market volatility

In late 2020, SONAR freight market expert Zach Strickland used the ULSDR data index in conjunction with FUELS to gauge the volatility of the diesel fuel price market.

His analysis found that ULSDR data and FUELS signaled the potential beginning of a longer-term change, signaling volatility in fuel costs — and carrier profit margins and/or prices into 2021.

Strickland noted, “With trucking capacity as tight as it has been in over a decade thanks to the COVID-19 pandemic, truckload carriers are enjoying some of the highest spot market rates since 2018. A big component of those freight rates is diesel fuel price costs, which after a sharp drop in April due to low demand have been extremely stable until this week, compressing the spread between the wholesale (rack) and retail price at the fastest pace in months. The spread between these two prices (FUELS.USA) can have a big impact on carrier profitability and how prices are set for bids.”

FreightWaves’ award-winning oil market journalist John Kingston wrote about refineries closing due to diminished demand across the globe: “Unfortunately for carriers, this will put increasing pressure on diesel fuel prices over time and already has in the form of wholesale diesel increasing 8%, or $0.10/gallon, between Monday and Thursday, the week of November 9th — the steepest increase since June, when the price of oil was recovering from record lows.”

Strickland continued, “The difference between the summer increase and now is the fact suppliers are making the move to reduce production for a longer period of time while freight demand is experiencing record high levels thanks in part to the massive growth in e-commerce around the holiday season.

Wholesale diesel prices — the price that many carriers’ fuel purchase is based on — have been relatively stable since late June, hovering right around $1.33/gal before falling after Labor Day to hit a floor just below $1.25/gal. The price-adjusted back to pre-Labor Day levels this past week of November 2nd.”

diesel fuel price ULSDR and FUELS

Ultra-low sulfur diesel rack price, fuel spread between rack and retail price – USA SONAR: ULSDR.USA, FUELS.USA

The price of diesel is obviously important to carriers because it is a significant cost, accounting generally for 15% to 30% of the cost of operating a truck. Over the past several months, that cost has been diminished thanks in part to the stickiness of the retail price — the price that many fuel surcharges are based on that carriers pass along to the customers.

Fuel surcharges are typically based on the price reported by the Department of Energy on a weekly basis. Retail prices tend to be much more stable than rack prices due to hedging and bulk purchases by retailers. For these reasons, the retail price of diesel fell from $2.85 to $2.40/gal (-16%) from the first week in March to the first week in May, while the rack price fell from $1.61 to $0.89/gal (-45%) during the same period.

diesel fuel price ULSDR and DOE

Rapidly declining fuel cost was a tailwind for carriers during this period when volumes were still recovering. Carriers that purchased fuel based on the rack price got the benefit of buying low and passing along a fuel cost based on the slower moving retail price.

When fuel prices rise quickly as they have done this week, it means carriers will spend more for diesel while capturing less on their existing customers that have a consistent fuel surcharge structure. It should be noted that less-than-truckload (LTL) carriers do not experience the exact same effect due to the fuel surcharges being based on a percentage of the freight charge rather than a cost per mile on the truckload side.

More important than the near-term impact on carrier margins is the long-term impact on pricing structures if fuel becomes more volatile due to production reductions. Carriers should keep a close watch on the price of diesel over the coming months as a return to a more volatile diesel fuel price means more exposure to potential losses if not included in pricing packages.

Keep ahead of the freight market and turn to SONAR to use ULSDR data and FUELS to measure diesel fuel price volatility

In uncertain times, freight market participants need certainty to stay ahead of the freight market and understand the freight demand occurring in each participant’s most important lanes. The premier freight forecasting engine, FreightWaves SONAR, allows participants to benchmark, analyze, monitor and forecast freight demand and costs.  SONAR ensures more proactive responses to the market, the ability to provide a solid customer experience by offering transparency, as well as to make faster, more informed decisions. Get a demo of SONAR to see what the platform can do for you.

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By increasing the number of loaded miles per day your drivers drive by 1% and your rate per mile by $0.03 you will make more per week #WithSONAR.

#WithSONAR you can save up to per week through better bid negotiations and more effective management of your routing guide.

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Disclaimer: Every company’s circumstances are unique. Fixed and variable expenses, market conditions and operational factors vary. Unforeseen events may also affect results. Calculated potential results reflect the consensus expectation of FreightWaves’ experts. Actual results may vary.

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