Copyright 2000 Journal Sentinel Inc.
Milwaukee
Journal Sentinel
December 23, 2000 Saturday FINAL EDITION
SECTION: NEWS; Pg. 03B
LENGTH: 690 words
HEADLINE:
Diesel rules may raise prices, industry says;
New EPA requirements for
cleaner fuel will take effect in 2006
BYLINE: KENNETH
R. LAMKE AND RICK ROMELL of the Journal Sentinel staff
BODY:
Remember last spring when stricter federal
requirements for cleaner reformulated gas were followed by short supplies and a
40% increase in prices at the pump?
Well, the same possibility exists
for the bus and trucking industry when new federal requirements for cleaner
diesel fuel take effect in 2006, a spokesman for Wisconsin diesel fuel retailers
said Friday.
The federal Environmental Protection Agency announced the
new diesel rules Thursday.
"Any time you have a little wrinkle in the
distribution system, you can have a big price impact," said Bob Bartlett,
executive director of Petroleum Marketers Association of Wisconsin. The
association represents gas station and truck stop operators. Both sell diesel
fuel, with truck stop operators selling more.
"I remember when the EPA
passed the RFG rules," Bartlett said.
"The industry said we can do phase
one, but we're not sure we can do phase two. Well, sure enough, there was a huge
price spike, and Milwaukee paid," Bartlett said, referring to the phase two
requirement that took effect April 1.
Gas prices in the
Chicago-Milwaukee market skyrocketed to the highest in the nation, although they
dropped back two months later after partisan political finger-pointing and an
increase in supplies.
The new EPA diesel regulations
aim to cut overall emissions from buses and trucks by 90%, in part by tightening
the sulfur emission standard from the current 500 parts per
million to 15 parts per million, a 97% reduction.
Bartlett said that the
industry argued for a reduction to 50 ppm of sulfur content --
still a 90% reduction -- but lost.
"It worries us," Wisconsin Motor
Carriers Association president Thomas A. Howells Jr. said of the pollution
rules. "We don't want to be painted as being opposed to clean air, because we
all want clean air, but a 97% reduction -- that's pretty significant."
The added fuel cost to trucking companies could be relatively small
compared with recent market-driven fluctuations in the price of diesel.
Nationwide, diesel currently averages $1.54 at the
pump, up nearly 50 cents from the price 18 months ago, although down from
$1.67 a gallon in October. The EPA, meanwhile, estimates its
rules will raise the price of diesel by 4 to 5 cents a gallon -- the same price
increase it predicted for the second phase of the rmulated gas requirements. But
the rules will make trucks more expensive too, and Howells said even small bumps
in fuel costs hurt in an intensively competitive industry in which even the
strongest firms post single-digit profit margins.
Besides, he said,
trucking companies this year have been hit not only by rising fuel prices, but
also by higher insurance costs, higher interest rates and a slump in the market
for used trucks.
"Right now, two cents (more) a gallon is too much for a
lot of our members, because some of them are on the ropes," Howells said.
But George Gaspar, oil industry analyst for Robert W. Baird & Co.,
said that while there will be a cost to meet the new EPA diesel requirement, the
regulation is absolutely necessary.
"The American
Petroleum Institute says there will be a 15 cent to 50 cent a gallon increase
because, they say, it will cause a shortfall in supply," Gaspar said.
"I
don't buy that. The industry's got to move on this. It can be done, and it
should be done."
Diesel is about one-third of the total motoring fuel
sold in this country, Gaspar said, adding that it made no sense to clean up
gasoline and not diesel fuel.
"I believe the cost will
be less than 15 cents a gallon," Gaspar said.
What caused the huge gas
price increase of 60 to 70 cents per gallon in spring was the fact that the
phase two requirement took effect just as gas supplies and prices were
tightening because of other market forces, Gaspar said.
"The EPA erred
in putting the mandate in effect at that time. They could have waited until this
year," he said.
The EPA should closely watch market supplies and prices
in the year before the 2006 deadline, and, if prices are high and supplies are
tight, defer the new diesel regulations until the situation
improves, Gaspar said.
LOAD-DATE: December 23, 2000
