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May 13, 2008
Panic at the Pump
With fuel prices remaining at historical highs, truckers are faced with unprecedented challenges. Should the government intervene to bring some relief to truckers and the overall economy?
These days, those who ship and distribute for a living are quick to wax nostalgic at the gas pump. And who can blame them?
The national average price of retail on-highway diesel climbed 3.4 cents to a new record high of $4.177 per gallon, according to the Energy Information Administration (EIA) late last month. So far this year, diesel pump prices have risen more than 24 percent from the start of 2008 and are nearly 49 percent higher than during the same time last year.
A one-penny increase in the price of diesel annualized over an entire year alone costs the trucking industry an additional $391 million a year, according to the American Trucking Associations (ATA).
The current price reflected at the pump is due, in part, to two main factors: surging crude oil prices and increased global demand for diesel fuel. While demand continues full tilt in the United States, worldwide demand for diesel fuel and other distillate fuels has been increasing steadily, with strong demand in China, India and throughout Europe, putting more pressure on the tight global refining capacity. And the longer oil prices stay above $100 per barrel, the less we can expect significant price reductions for diesel.
"There is a strong correlation between crude oil prices and diesel prices," the ATA says. "More than 60 percent of what we pay at the pump is due to the cost of crude. The same is true for gasoline."
"Until several years ago, the average price of diesel fuel was usually lower than the average price of gasoline," says the EIA. "Since September 2004, the price of diesel fuel has been generally higher than the price of regular gasoline all year round for several reasons."
As such, in late March the ATA urged President George W. Bush to release oil from the nation's Strategic Petroleum Reserve (SPR) in an attempt to reign in crude oil prices before they constrict the country's economy even more than they already have.
Testifying on behalf of the ATA before the House Select Committee on Energy Independence and Global Warming, Dave Barry, vice president of Arizona-based truckload carrier Swift Transportation, said releasing oil from the SPR combined with a temporary suspension of filling the SPR will help stabilize markets, reduce global demand for crude oil and ultimately lower fuel prices.
In his April 24 testimony, Barry said:
The trucking industry is the backbone of this nation's economy, accounting for more than 80 percent of the nation's freight bill and employing more than 8.5 million hard-working Americans. The trucking industry delivers virtually all of the consumer goods in the United States. We are an extremely competitive industry comprised of small businesses. Roughly 96 percent of all interstate motor carriers operate 20 or fewer trucks. Diesel fuel is the lifeblood of the trucking industry.
Indeed, commercial trucks consume 53.9 billion gallons of fuel each year. About 39 billion gallons, or 73 percent, is diesel, according to the ATA. The remaining 27 percent is gasoline. In his hearing, entitled Pumping Up Prices — The Strategic Petroleum Reserve and Record Gas Prices, Barry estimated that the trucking industry consumes more than 39 billion gallons of diesel fuel each year.
Releasing oil from the national reserves is rare, usually occurring only during supply disruptions. The most recent example occurred in 2005, when Hurricane Katrina forced the closure of many oil refineries in the Gulf of Mexico, prompting the release of 11 million barrels of oil.
The SPR currently holds just under 700 million barrels of oil.
ATA's testimony also called on Congress to enact measures to increase the supply of oil and diesel fuel, including the following:
- Increasing domestic oil exploration;
- Increasing domestic petroleum refining capacity;
- Eliminating the tax subsidy for exported biodiesel; and
- Enacting a national diesel fuel standard that eliminates state biodiesel mandates.
The trucking industry is experiencing the highest prolonged fuel prices in history. The dramatic increase in the price of diesel has coincided with a downturn in the national economy and a softening demand for freight transportation. All the while, according to a statement from the ATA, the trucking industry is "making every effort to limit fuel consumption, including lowering speed limits and utilizing equipment to reduce idling."
Should the U.S. government intervene to bring some relief to truckers and the overall economy? The ATA thinks so. Do you?
Resources
Weekly Retail On-Highway Diesel Prices
Energy Information Administration
Pumping Up Prices — The Strategic Petroleum Reserve and Record Gas Prices
Statement of Dave Berry on behalf of the ATA
U.S. House of Representatives, April 24, 2008
Diesel Fuel Prices: What Consumers Should Know
Energy Information Administration
National Fuel Price Watch: Fuel Facts
American Trucking Associations, May 5, 2008
Strategic Petroleum Reserve — Profile
U.S. Department of Energy
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26 CommentsThe biggest problem I see is that most of these additional costs are passed on to the end-user: the American family.
The supposed "fuel crisis" of the 70's "just happened" to coincide with the entry of women (especially well-educated women) into the work force en masse. With salaries flat, jobs disappearing and the continued influx of illegal aliens, where is the extra income for the American family going to come from this time? The return to child labor?
May 13, 2008 1:33 PMInteresting how every industry considers itself the "backbone" of the economy.
Surprisingly absent from this article and many others as a reason for high crude prices is that crude is an internationally traded commodity that is priced in US Dollars. As the value of the dollar sinks, it naturally is going to take more dollars to purchase the same amount of oil. Increased international demand is a valid reason for the price increase, but it's not the only one.
May 13, 2008 1:36 PMI don't remember anyone helping the oil industry with $9.00 oil in the 80's when lift cost was $14.00. All industries need to figure out how to work within their income's. I also believe if we could get government to work within budget, then a lot of our business problems would be fixed.
May 13, 2008 1:42 PMYes, the government should help by tapping into the fuel reserve. However, we don't have the refining capacity to convert crude oil to diesel ful.
May 13, 2008 1:44 PMThe government should only do two things: STOP importing foreign oil and release all the US reserves. We should also realize that we are laboring under the false world view of evilution.
Oil is a renewable resource, but we are being fooled into believing the lies of modern science. Oil fields are not made from dead dinosaurs and plants. Oil fields that were once pumped out are now producing oil again. Did the dead plants and dinosaurs get up and move to the dry fields? The same is true about nuclear power...we could have been free from the tyranny of government-controlled energy decades ago but we believed the lie about disposal of spent nuclear fuel needing millions of years to become safe for disposal. Every community could have had its own very small and very safe nuclear power plant to provided cheap, safe electricity. But we let big government protect big labor and build monopolizing big power plants all at the price of freedom and our treasure...FOOLS! Where the is no knowledge the Lord's people perish. We have chosen to believe the liars of the age instead of believing the Living God.
What do I mean? The earth is not billions of years old as we have misled to think, it is only about 10,000 years old according to the Bible! So it can't take millions of years for the natural processes that create oil or breakdown nuclear material to occur! But we believed the lies and not God and his word and we are paying dearly for that SIN.
May 13, 2008 1:59 PMThe government sucks at business, plain and simple. They can't get postal, healthcare, SS, or education right, so why should they mess with oil? Let the oil companies drill and satisfy our fuel needs. Time to take the credit card away from all our officials and fire 50% of them.
For too long our government has been dependent on fossil fuels and has not looked into alternatives. Unfortunately for the Americans we are run by the government and corporations. The rich get richer and the poor get poorer. Now the Arab rich countries own us also.
I thought Bush would fight for the American people,,,,but least we forget he is padding his pockets for the future; remember, he gets his money from oil, also. The American people need to unite and have him impeached. If he is thrown out of office before his term runs out, we won't have to pay his salary, etc., for the rest of his life.
It is time the people said how their money is spent. I'm tired of paying our government reps a healthy salary and retirement and watching mine fade fast!
May 13, 2008 2:05 PMThis country is badly in need of mass transit, education, and getting kids out of cars.
I know this article deals primarily with trucks using diesel fuel, but this could be alleviated by having a better rail system using faster lighter rail engines and cars. Using electric rail systems powered by wind and nuclear energy would save an enormous amount of fuel.
We would also be better off educating our people as to how to save fuel and that the cost of fuel is directly proportional to their intelligence or stupidity. We don't need to jump in our cars to go places on a whim or just to drive somewhere instead of walking. The walking thing would have the side benefit of reducing our insurance rates and health care costs.
How many of us have kids that drive to school, go to the movies, cruise or go to the mall to
May 13, 2008 2:06 PMLong haul trucking and just-in-time delivery were the result of cheap oil; now that cheap fuel is a thing of the past, industry is going to have to adopt the transportation and warehousing strategies that have not been seen in the US since the late 1960's.
We will need rail, we will need warehouses, and we will need to adopt to slower delivery standards. Truckers will find work moving freight from warehouses to the point of use; unfortunately this type of work does not pay as well as the long haul but this is our new reality. Corporations are going to have to relearn how to inventory and plan ahead.
The price of goods will temporarily increase as this transportation/warehousing switch occurs, but in the long run it will mean a deeper supply chain and better "sale" opportunities as warehouses clear inventory for new products. Welcome back to the mid 20th Century!
May 13, 2008 2:09 PMThe government has already distorted the market, since federal fuel taxes are simply tossed into the pot and spent anywhere.
Properly, fuel taxes should be used strictly to finance, repair, and maintain roads and limited accordingly, with competition among private entities to provide these services. Instead, funds are skimmed for light rail and other pork barrel projects for vote buying, and only the fiscal dregs remain for the road system.
The strategic oil reserve is a colossal waste of money, buying high and selling low on a zero interest investment is never wise.
May 13, 2008 2:36 PMMost of the comments I read here are so far away from the reality of the trucking industry. One person wants to use the rail system...that's great if we want to shop out of rail yards instead of our local stores or malls. Remember it takes a truck to get it there. The railroads are in competition with trucking but they (railroads) make all the rules for this industry...to make this simple, it would be like Sears making rules for JCPenney's. Not quit fair!!!
Looking for new sources of fuels is a great idea, but we still have to have oil now to keep this country running!
If the people in Washington would stop playing politics and actually be concerned for our country we could start using the 85% domestic oil we currently have that we are not allowed to bring up because of the EPA. The oil companies could build refineries if our government wouldn't require the licensing and permits to take over 10 years to obtain. The best thing the government could do for this industry is back off in all of their overbearing rules and regulations, let them run tax-exempt fuels like the farming industry and go after the brokers who are stealing monies from each load delivered.
May 13, 2008 3:04 PMAsking the government to intervene? As if they haven't meddled enough already!
WHO has restricted oil exploration?
WHO has restricted domestic refining capacity?
WHO mandates biodiesel and ethanol in fuel?
WHO artificially alters market supply and demand with taxes, subsidies and regulations?
POLITICIANS spend half their time screwing our lives up, and then claim to be the heroes when they come up with equally convoluted "solutions" for the problems they cause. A true free market in oil (or anything else for that matter) will increase supply and regulate prices. Government needs to get out of the way.
May 13, 2008 3:12 PMGet nuclear. Nuclear-powered cars were developed in the 1950s. It's time we all got smart and pressured our government to do what's best for the most people. That's democracy in action.
As for Bush, he should be impeached along with Cheny. They have singlehandedly put us in the economic situation we're in.
May 13, 2008 3:12 PMThe only thing unaccountable government can promise and deliver is more unaccountable government.
The president is a very small part of the overall big problem of big government. Impeaching him doesn't fix the problem. We need to get rid of all incumbents until we get all of their attention.
Then we need to restore the Constitution to its Original Intent. To find out more about the Original Intent of the Constitution, get the book by that name written by David Barton and available at http://www.wallbuilders.com
For more information about America's Founding, go to http://www.libertyfund.org. Over 1,000 full-length books completely on-line and free. They have the On-line Library of Liberty. I highly recommend it.
The same principles which made America great in the beginning can return America to greatness again.
May 13, 2008 4:56 PMC'mon Ken! Do you really believe that the earth is a mere 10,000 years old?
I believe in God myself, but not in the time frame you suggest. God's time may be different from ours and our sense of time, space and consciousness may indeed be relative.
This I do believe...the oil fields will be depleted and once they are gone, they're gone my friend. Same with the coal seams...no new coal seams being 'produced'...once they're gone, they're gone forever also.
We are stewards on this planet and we'd better get good at managing resources and engineering populations. If we do none of it well...well the species may suffer as a result of our shortsightedness.
May 13, 2008 5:23 PMFor God's sake and our own -- Keep the government OUT of this problem. They will only make things worse and vote themselves another fat raise. We should be asking why light rail lines do not run between cities -- down the median between all the freeways. The overpasses and bridges are in place. And why haven't we ever sought to make trucks more efficient than 6 mpg?
In 1984 I purchased a Nissan Sentra diesel that touted 50/66 on the windshield. Although it barely got 50 mpg in the city, 66 mpg was LOW; 70 mpg was closer to the truth. I kept the car for 14 years & over 240,000 miles before the salt crusted winters in NE Ohio destroyed the body. Why don't they offer that same engine today?!?
May 13, 2008 10:40 PMOne of the things that keeps getting glossed over in this fuel business is that we could help ourselves a lot by getting the technology of Coal to Liquid (CTL) operating at full belt. There are two proven technologies that can and DO produce liquid fuels equivalent to diesel fuel and gasoline, that are able to be put into action with some help from the Feds and getting EPA and DOE out of their way.
I am speaking of the Bergius process, invented in 1913, and capable of changing lignite (brown coal/peat) into liquid gasoline and other hydrocarbon products, such as diesel, bunker oil for ships, etc. The other, and most promising, is the Fischer-Tropsch (F/T) process, invented in 1920, that does the same thing with other types of coal. The processes take the coal-gasification process to get natural gas, and then convert it with the use of catalysts, into the products we need. Diesel and gasoline.
In World War II, the Luftwaffe (German Air Force) had around 75% of its aircraft fuel near the end of the war, produced using the Bergius process. Focke-Wulf and Messerschmidt fighter aircraft, with about the highest-performance engines of the war, were able to fly and fight with this synthetic fuel with virtually no reduction in power or operation. In South Africa, when the embargo went into place due to the Aparthied policy, and a lack of desire to change it, they solved their problem of getting diesel fuel by using synthetic, coal-based fuel, made by the F/T Process, for over 90% of the diesel used there. And they still do.
All we hear in the U.S. is how to convert corn to ethanol, when we have over 800 years worth of coal at present usage to convert to liquid fuels, using proven technology. The Air Force has gone so far as to start flying the venerable B-52 bomber on a mixture of 50% F/T synthetic fuel and 50% JP-8 jet fuel. By 2011, the Air Force plans to have the entire air fleet certified to use this combination JP-8/synfuel mix for its primary source. The B-52 is already certified to use it with no loss of performance. The C-17 is undergoing tests, and will be certified soon. It is only a matter of time before the whole fleet flies on this.
So, why can't the average Joe or Jane in America use this same sort of stuff to power his sedan, SUV, van, or diesel truck? No reason at all, other than resistance from the Oil Companies (at least, that's what I suspect). You see, the oil companies probably don't own the coal fields. Coal companies do. Oil can't make big money out of it.
And the cost of the F/T fuel? Fairly reasonable, at about HALF what crude oil products cost.
So, why is the cost of crude so high? Easy. More demand by other nations, such as China, India, and other places in the Far East. More competition for a limited resource, and indeed, the price will go up. Add to that the greed of Wall Street speculators, who see the oil crisis and the rising cost of crude as another opportunity for them to make a ton of money on the shoulders of all of us consumers. We can't afford to invest like they do, so the average person on the street takes the hit.
My recommendation is for Congress and the President, either G.W. Bush or whoever the next one will be (Obama or McCain) or both, to get out of the way of the technology, and help to develop this one resource that we still have lots and lots of. Get the EPA and the DOE out of the way and let us use it.
Wouldn't it be great to be able to tell OPEC what they could do with their oil?
May 13, 2008 11:35 PMbullsh!t diesel should be 5 to 8% lower than regular gas in the past ...has always been. June 2006 diesel was $.010 to $.019 lower than regular. What is different is we had low and ulra low sulfur diesen then as well. Let the states and feds cut the taxes 50% or sit on their asses and do nothing. I have six donkeys and two mules, so I guess it's time to park my truck and sit on my asses than the leather seats in my 2006 f250 King Ranch seats.
May 13, 2008 11:50 PMA new record high of $4.177 per gallon for diesel in America.
Try the UK price of £1.30p per litre (£5.91 p/ imperial gallon) if you want. I and every one in the UK would welcome your prices for diesel over here, and that is the price today, tomorrow it will be even dearer, as it is going up each and every day in the UK.
May 14, 2008 3:40 AMKen and Glenn, 10,000 years old or 10 billion...doesn't matter. I am not looking for another world-wide flood to bury vegetation creating fossils and oil. When it is gone, it's gone.
Yes, we need oil to keep running, but what if we'd developed alternative energies decades ago...instead of paying farmers NOT to farm their fields?
Brazil has switched to alcohol, but we are not as smart as them? Didn't Australia build a solar tower? Solar is not practical...cover the state of Texas, blah blah blah...afraid you can't put a meter on my house to tax the sun beating down on roof panels? King James taxed people for the number of windows in their house. It's all about greed! The Chinese are way ahead with electric cars...though the first production car to exceed 60 mph in the US was electric...1903?
What if we'd developed electric cars over the last century? There are many alternative fuels that show promise. Don't believe all the negative hype. If we invested the billions of dollars into research that we've invested in the war in Iraq to protect the Saudi's...we'd be on our way! Do you really think our government would help this situation? Wake up! And urban sprawl and poor planning make walking and mass transportation difficult in this country. Try walking in my neighborhood when it is 40 below wind chill...or walking here unarmed in nice weather!
May 14, 2008 10:05 AMWhy is it that as a society we can't come together and solve this oil price gouging WAR? Because we continue to support the animals who are price gouging us.
I watched my fellow Americans line up 4 and 5 cars deep at an Exxon gas station, paying higher prices then the station next door, on the day that Exxon reported the 2nd highest profits in their history. We can't change the increased demand worldwide but we can affect the oil company profits nationally. Oil companies like all big business are driven by profits for their shareholders. But most of us are not shareholders, so let's use their profits against them.
Our media outlets should report quarterly a complete list of oil companies and their profits. We as a society should then support only the two companies that report the LOWEST profits. The rest of the oil companies can choke on their oil or sell it below market value to our chosen supplier. And if our two selected companies raise their profits in the following fiscal quarter, they are blacklisted from our preferred oil supplier list forever. Within one quarter, the fat cats of oil will topple their top-heavy companies, never to cross the American people again.
United we stand, DIVIDED we most assuredly will fall, as foreign countries suck our American Dream from us. Make no mistake this is a war and America is getting its ASS KICKED. Lets wake up people!
May 14, 2008 10:50 AMI am a rep for SYNTEK Global, a company that has been in business for 18 years and which has been distributing a fuel additive commercially for the past 12 years. TELECOM, manufacturing and mining industries have been our biggest users until this year. In late 2007, we secured a patent for distributing our fuel treatment to the public for gas and diesel vehicular use under the brand name "Engine Boost 2.0". This product is now registered with the EPA and is backed with our 100% Money-Back Satisfaction Guarantee.
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Well... I've read the notes... and I think we are our own worst enemy. We had cheap fuel and started building distant malls and moving out of cities. Now that fuel is getting expensive (note:getting) we find ourselves in a fix.
Human nature will prevail here. We will adapt to the situation... car pool, turn off the lights, the idling computer, etc. Unfortunately, none of us will do that till it hurts and we have too.
Let's just be thankful that this is a somewhat artificial price inflation... just think of what would happen if a major producing well ran dry and supply really became an issue?
May 20, 2008 4:47 PMThink about this... 10,000 millions, however old the earth is, we have been using gasoline & diesel for ~100 years. As was said, we will adapt and find another way to power our transportation. Blaming the president, Congress or big business doesn't accomplish anything. We are the innovators - come up with innovative ideas for alternative sources of power.
I just heard that ultra capacitors will be to market in 3 years. Something like that can make electric cars much more feasible as long as they are not to big & heavy.
May 20, 2008 5:40 PMIt's time to release all patents on energy saving processes to the public. There are hundreds of patents which have been either suppressed by our government patent office due to the oil lobbyists in Washington, or bought up by oil companies which do not want this information out in the public eye where other energy sources can compete with their antiquated processes, or patents purchased by the auto industries with the same aforementioned monopolies in mind.
May 21, 2008 7:10 PMWhat you are all missing is the excitement of the X-Prize race with a 10 million dollar prize for the car that wins this 100 MPG race.
It has to be a car that is practical, that people would buy, have all the HVAC features and safety items required by our present day vehicles, and get 100 MPG's or equivalent.
No, one of a kind, science fair, UFO style freak cars.
So far over 80 teams have registered for the race, sadly, not one entry from the major U.S. car maker.
