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ULSD concerns linger just months before introduction; ATA predicts minimum nickel per gallon premium
ALEXANDRIA, Va. -- Fuel and fuel prices are at the very top of the trucking industry's list of concerns these days. And things are getting even dicier with the advent of ultra-low sulfur diesel and the expansion of biodiesel across North America, says the American Trucking Associations. In a recent teleconference with trucking journalists, Tim Lynch, ATA senior vice-president, said that with fuel prices higher than they've ever been in history, truckers are on pace to spend about $5.5 billion more than last year, which was then a record high. "I don’t think there’s anyone who believes that the price of fuel will be moving down," says Lynch. "It’s really only a question of how high it will increase." Pinning down a general figure is complicated by the introduction of ULSD later this summer. There's little doubt that the new fuel— which cuts the sulfur content from 500 parts per million to just 15 ppm, and is required for 2007 low-emission engines— will have a cost impact on carriers as they gear up for the heavy fall freight season.

The price of ULSD at the pump could be at least 5 cents a gallon before
transportation and handling costs: ATA
How much exactly is tough to say, since the fuel is not at the marketing stage yet. At a recent heavy-duty manufacturers' conference, one engine maker said a large fleet in the U.S. testing 2007 engines in real-world hauling conditions reported that ULSD was about $1.00 more a gallon than the current blend late last year. Rich Moskowitz, ATA's regulatory lawyer, isn't reporting that dramatic of a price tag these days. He says fleets testing the new engines and fuel today are paying a premium of somewhere between 25 and 40 cents per gallon more. However, Moskowitz warned truckers not to draw conclusions from those numbers, adding "it's not typical of what we would expect them to pay once ULSD becomes the dominant fuel in the marketplace … It’s only being produced in very small batches now." At this point, Moskowitz predicts ULSD will carry at least a 5-cent per gallon refining premium. "And there is likely to be increased distribution costs, depending upon how the fuel is managed as it moves through the pipelines and the terminals and ultimately the tank trucks to the point of sale," adds Moskowitz. Furthermore, the fuel will have a 1 to 3 percent lower energy value than current diesel, meaning truckers will have to burn at least that much more fuel than they do right now. While suppliers have done a better job of explaining the issues in terms of marrying ULSD with the '07 engines, concerns over availability, sulfur contamination, and the transportation of the fuel, still linger. "Because the fuel is easily contaminated with sulfur, we’re concerned about its availability in certain parts," says Moskowitz. "As a commodity subject to the laws of supply and demand, if the availability of ULSD becomes problematic, we would expect to see price spikes for that commodity, and that is of great concern." Moskowitz says that the further away carriers are from the source of refining the material, the more difficult it will be to maintain its integrity. "So for fleets located at the end of the pipelines, North Dakota, Upstate New York, those areas may become the problem spots," he says. The trendy fuel topic that's grabbing all the headlines these days also found its way into the ATA fuel discussion. Low biodiesel blends of B5 or less are supported by the trucking group. Most engine OEs have also indicated that blends of less than 5 percent should not create problems for the end user. However, the effects of biodiesel mixed with ULSD are less clear, says the ATA. "We are pretty confident that biodiesel that meets the quality specs when blended with today’s fuel in amounts of less than five percent is not posing significant operational challenges," says Moskowitz, "but ultra-low sulfur diesel, when you hydro treat that fuel to take the sulfur out is going to undergo some chemistry changes, and right now we don’t have enough experience of blending bio-diesel with this new fuel to know whether there are any hidden challenges in the future for us."
 
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