The American Trucking Assns. (ATA) yesterday outlined its concerns that the transition to ultra-low sulfur diesel (ULSD) fuel will bump prices up over a nickel per gallon, as well as yield lower fuel economy.
Based on recent fuel price forecasts, the ATA has revised its projected fuel costs for the trucking industry upward to $91.3 billion in 2006. This would be a 7.5% ($6.6 billion) increase over the $87.7 billion spent in 2005.
“With respect to the transition to ULSD, we have added concerns that it will exacerbate pressure on fuel costs,” said Richard Moskowitz, ATA assistant general counsel and regulatory counsel. “[ULSD will cost] five cents more per gallon to produce plus an expected increase in distribution costs. Plus it has a 1% lower energy value.”
ATA pointed out that ULSD could easily be contaminated by residual sulfur in the distribution network. This adds to supply uncertainties, which could ultimately lead to price spikes in affected areas, ATA said.
“The unknown of the future will keep a floor on the prices to keep them form falling too much,” Oil Price Information Service markets editor Denton Cinquegrana told FleetOwner. “Any time you see any major spec changes you’ll see some nervousness despite some years [refiners had] preparing for it. It’s not always a seamless transition but it could be blown out of proportion. But for the most part it’s never the apocalypse people expect in the market.”
On June 1 the ULSD rule goes into effect at the refinery level. It goes into effect at the terminals by Sept. 1 and by Oct. 15 retailers must sell ULSD with a sulfur content of no greater than 15 parts per million.
This all comes as the national average price for a gallon of diesel soared 11.1 cents to $2.876 for the week ending April 23, the Energy Information Administration announced yesterday. This was a whopping 58.7-cent increase over the same week last year.
All regions posted a significant price increase and the Gulf Coast region suffered the least of it, rising “only” 9.2 cents to $2.817. The Gulf Coast also held its claim for being the cheapest region in which to purchase diesel. Conversely, the region that had consistently held the highest diesel prices also saw the largest jump: in California diesel rocketed 17 cents to $3.103.
For more detailed diesel price information, go to www.fleetowner.com/diesel.xls.