This past Friday, marked the deadline in California for all retail pumps to transition from low sulfur diesel to ultra-low sulfur diesel (ULSD) and it all went without a hitch, experts say.
That deadline, mandated by the California Air Resources Board (CARB), was several years ahead of the U.S. Environmental Protection Agency-mandated national deadline of Dec. 1, 2010. On Oct. 15, 2006 many retail outlets across the U.S. are expected to transition to ULSD, although low sulfur diesel may still be sold outside of California between Oct. 15, 2006 and Dec. 1, 2010.
Energy experts had long predicted that ULSD would cost at least four cents more per gallon than its low sulfur counterpart. In California, there was no spike in diesel prices, the Oil Price Information Service (OPIS) said, a third-party research firm that tracks prices daily.
“I haven’t seen [that the Sept. 1 deadline] had much of an impact on diesel prices in California,” Denton Cinquegrana, OPIS markets editor told FleetOwner. “There’s some truth to that it is more expensive because it’s a little harder to make it and refiners had to upgrade their equipment and terminals had to upgrade their equipment as well.
“But refiners have known about this transition for years,” Cinquegrana continued. “The pipelines companies have been altering the way they ship products. The added costs had been gradually priced into things. The market has already been trading ULSD for months. The spot market will have an impact on how it works on the wholesale racks and for the most part, ULSD has been on its way downstream.”
The California ULSD rule affects 1.2-million diesel engines, according to CARB. The agency noted that some California refiners had been producing ULSD for several years, allowing CARB to mandate rules requiring that school buses, transit buses and refuse trucks use ULSD.
“California seems to have made the conversion to ULSD well in advance of the Sept. 1 deadline,” Tupper Hull, director of strategic communications of the Western States Petroleum Assn. told FleetOwner. “The California Energy Commission indicated in the week prior to Sept. 1 that the vast majority of the market was already selling and buying ULSD at retail outlets. Some private fleets, particularly those that make bulk fuel purchases, had been using ULSD. This was certainly not an abrupt transition; it had been occurring over a number of years. If there had been an impact pricewise it had already occurred.”
Rob Schlichting, spokesman for the California Energy commission said that a price increase from the transition to ULSD may be more pronounced outside of California.
“That switch was made easily in California,” Schlichting told FleetOwner. “We have been doing cleaner diesel for a long time. The change [to ULSD] wasn’t as drastic in California as it would be in other places.”
Hull declined to predict whether the smooth California transition to ULSD foreshadows a similar nationwide experience leading up to Oct. 15, 2006.
“The same effort that has been put into the California transition is being applied nationally,” Hull said. “It’s the same program, it just happened in California a little earlier because of the CARB regulation. The Energy Information Administration has been tracking ULSD production and continues to voice confidence that there has been adequate supply.”To comment on this article, write to Terrence Nguyen [email protected]