News
All Thing Fuel
Summer of slam
Fuel prices expected to heat up even more

By Terry Scruton
senior writer

This summer, it will be a race to see which rises faster: the temperature, the price of diesel or the blood pressure of the average trucker.

The U.S. Energy Information Administration's short-term energy outlook released in May called for an average summer diesel price of about $2.75 per gallon. That's up about 13 cents from the previous forecast released in April.

Compare that with last year's actual average of $2.59 per gallon for diesel from April through September.

Add to that the fact that the national average price for diesel for the week ending May 8 already beat the EIA's forecast, at $2.897 per gallon. And in California, diesel has been above $3 a gallon since April.

Put it all together and you've got a recipe for a long, expensive summer. In fact, the EIA's report said drivers shouldn't expect prices to drop any time soon.

"The prospects for significant improvement in the world petroleum supply and demand balance appear to be fading," the report said.

What that means, according to the report, is that while U.S. fuel production will continue to grow in 2006 as more refineries recover from last year's hurricanes, significant production increases are not expected from other sources, such as the Organization of Petroleum Exporting Countries.

In addition, world demand for oil is only expected to keep on rising, which will put further strain on supplies.

The good news, if it can be called that, is that the forecast said that - barring any further significant damage from hurricanes - fuel prices in September should be significantly lower than they were in 2005.

However, the report cautions, "with another active hurricane season possible this year, news of developing hurricanes and tropical storms with a potential to cause significant new outages could add to volatility" in prices toward the end of the summer.

Complicating factors
Another potential problem could be the switch to ultra low-sulfur diesel, which began at the refinery level on June 1.

Problems with the government-mandated switchover from gasoline additive MLBE to ethanol have already been blamed for some gasoline price increases. This could be a sign of things to come for the switchover to ULSD.

The Environmental Protection Agency said that any disruptions along the pipelines during the transition process could lead to spot shortages and localized price spikes. As it is, ULSD is expected to cost as much as 5 or 6 cents more than current diesel prices.

In the April forecast, EIA officials said that the transition to ultra low-sulfur diesel is "possibly the most difficult fuel specification transition the refining industry has had to make so far" and that transition will result in "increased production costs and distribution complexity."

Supplies of ultra low-sulfur diesel are another concern. The April report said it may be difficult to obtain imports of ULSD, which could cause localized price spikes in the event of a domestic supply disruption like last year's hurricanes.

Takin' it to the streets
There is already a growing resistance to the higher prices. The EIA report said that, although world demand is up in 2006 compared to 2005, rising fuel prices have kept the demand from going as high as predicted. And at the local level, things are heating up across the country.

The co-host of a morning show on a New York radio station called for truckers there to shut down their rigs on May 15 to protest the high price of diesel.

Bob Wolf of WPYX-FM radio said he got the idea when truckers called in to complain about the high price of diesel - which is at $3 per gallon or more at many New York truck stops.

Wolf told "Land Line Now" that truckers pay 28 cents a gallon just in New York fuel taxes, and that a work stoppage might prompt state lawmakers to lower that tax.

In addition, a truck stop owner in Connecticut urged truckers to park their rigs on May 30 to protest high fuel prices.

Walter Dethier, who owns the Berkshire Country Stop store in West Cornwall, CT, said he hoped four-wheelers will join the protest, too.

Land Line went to press before both of these events were scheduled to take place.

Meanwhile, in Texas, an entire county was getting into the act.

In May, officials in Bee County, TX, called on residents to boycott stations that sell Exxon-Mobil fuel.

The Express-News reported that County Judge Jimmy Martinez wanted retailers to drop prices to $1.30 per gallon.

And Exxon-Mobil was targeted, the paper said, because its former CEO got a $400 million retirement package.

Martinez said the resolution the county passed that calls for the boycott offers residents "a beacon of hope."

terry_scruton@landlinemag.com
Staff Writer Reed Black contributed to this article.

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