U.S. DIESEL PRICES EASING BACK AFTER OCTOBER JUMP

Prices for diesel fuel in the U.S. are easing after spiking last month in response to California and federal mandates for environmentally cleaner versions of the fuel. Shortages were noted mainly in the Midwest and West Coast areas in October. Prices for diesel fuel shot up Oct. 1 because a new federal 4.3cts/gal fuel tax went into effect at the same time as new Environmental Protection Agency and California Air Resources Board specifications for diesel.

Nov. 8, 1993

3 min read

Prices for diesel fuel in the U.S. are easing after spiking last month in response to California and federal mandates for environmentally cleaner versions of the fuel.

Shortages were noted mainly in the Midwest and West Coast areas in October.

Prices for diesel fuel shot up Oct. 1 because a new federal 4.3cts/gal fuel tax went into effect at the same time as new Environmental Protection Agency and California Air Resources Board specifications for diesel.

EPA specifications call for on highway diesel fuel as of Oct. 1 to contain less than 0.05 wt % sulfur. CARB specifications require the same sulfur content as EPA but also call for steep reductions in aromatic hydrocarbon content.

Outages early last month along the Explorer pipeline, which carries diesel from the Gulf Coast to the Midwest, caused spot shortages of low sulfur diesel. The pipeline was back in service Oct. 10.

Meantime, a group of independent semitractor trailer truck drivers are trying to organize a nationwide shutdown Nov. 11-17 to protest higher costs and compliance deadlines, according to newswire service reports.

CALIFORNIA DIESEL

A survey by California Independent Oil Marketers Association (Cioma) showed rack prices on Nov. 1 ranging 79-80cts/gal in most areas, down from about 95cts/gal in the central and northern parts of the state mid-October.

Cioma said as of early this month supplies of diesel meeting the CARB specs are readily available.

Rack prices of CARB spec diesel were higher in the northernmost part of the state near the Oregon border, Cioma said, ranging 81-85cts/gal. Prices were lowest in the Los Angeles area at 72-75cts/gal.

Refiners have the option to develop alternative blends with lesser aromatics reduction, as long as the blends achieve the same overall emissions reductions required by CARB. Several refiners have chosen to develop alternative blends. These generally meet the CARB emissions standards through even steeper than required sulfur reductions or by increasing the cetane number.

In mid-October CARB passed a temporary ruling that allows the purchase of high sulfur diesel for off road uses through Dec. 4 to stem controversy over high prices, supply shortages, and reports of engine problems from CARB fuel (OGJ, Oct. 25, Newsletter).

Cioma said prices of high sulfur diesel have increased by 5-7cts/gal, but the fuel isn't available in many agricultural areas. High sulfur fuel is in particularly high demand by agricultural users, Cioma said, because of widespread concern that CARB spec fuel is linked with a reported increase in engine O-ring failures since October.

Meantime, a task force appointed by California Gov. Pete Wilson to examine the effects of the new, cleaner diesel on the California market and engine performance was to hold its first hearing Nov. 8.

The task force is to issue a final report by Nov. 15.