NEW YORK — some tanker fleets that haul petroleum products are worried that the added costs of accommodating new ultra-low sulfur diesel may dramatically lower their bottom line.
Those tank carriers are dishing out thousands of bucks for new equipment in order to segregate ULSD from other petroleum products with much higher sulfur content like jet fuel, kerosene and off-road diesel.
As of last Thursday, most refiners in the U.S. and all in Canada are required to produce ULSD with a sulfur content of 15 parts per million (PPM), down from 500. Retailers have until the fall to sell it.
However, even though fuel producers will manufacture ULSD at around 8 ppm to leave some room for contamination, it’s expected that at least a small portion of the North American supply may still come into contact with enough sulfur during distribution to render it unmarketable for highway use.
Transportation providers, for example, will be required to follow stringent new tank flushing and loading guidelines in order to mitigate contamination. Companies that transport many types of petroleum and oil products will likely have to invest in new equipment as well.
That’s good news for tanker manufacturers — which, according to New York-based market analyst firm Bear Stearns, are reporting all-time tank trailer demand — but has carriers thinking up new ways to bring down costs.
The consultant firm describes how one large tank outfit in the U.S. recently wrote an open letter to its customers indicating that it believes ULSD can be successfully loaded behind product already low in sulfur like tier two gasoline with almost no residual contamination — even if tankers are not allowed to drain dry prior to loading.
“The thinking is that even though the maximum allowable sulfur content in gasoline today is 80 ppm, most gasoline averages between 30-40 ppm,” Bear Stearns explains. “Based on this, the fleet is asking its customers to allow the fleet to load ULSD behind gasoline, ethanol, and bio-diesel (while) higher sulfur products like aviation gasoline, jet fuel, and kerosene will have segregated trailers.
By their estimations, says Bear Stearns, any restrictions prohibiting the loading of ULSD behind gasoline will result in a increase in a 5 percent increase in their diesel line-haul rates to cover the costs associated with acquiring additional trailers, lost utilization, and mid-shift trailer switching.”
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