NEW YORK — The trucking industry’s transition to ultra-low sulfur diesel (ULSD) will be like a “planned hurricane,” with suppliers bracing for some expected supply shortages, contamination, and price volatility.

That’s according to engine and fuel experts, and truck market analysts that took part in trucking economist firm Bear Stearns’ ULSD Industry Conference Call that took place recently.

Starting in October, all diesel fuel manufactured in North America will have its sulfur content dropped from 500 parts per million (ppm) to 15 ppm. ULSD is required for compliance of new EPA-mandated ’07 truck engines, which cut NOx and particulate matter (PM) by another 90 percent from 2004 levels.

However, as Today’s Trucking has reported over the last year, there are lingering concerns that some ULSD will inevitably come into contact in the pipeline and during handling with residue left from higher-sulfur products like furnace oil and jet fuel, thereby raising the sulfur content in fuel. With some contaminated product getting remarketed, supply shortages could occur.

On the surface, low and high sulfur fuel doesn’t look
much different, but your new ’07 engine would disagree

Meanwhile, there’s a possibility a patchwork rollout process by truck stops “would drive further volatility in the quality, price, and availability of ULSD until the entire network has literally been flushed out,” according to a report based on the Bear Stearns ULSD Call.

Furthermore, experts taking part in the teleconference say accidental misfueling could take place because, unlike during the transition to unleaded from leaded fuel, there will not be different nozzles put on different tanks.

Despite suggestions in the past by suppliers that end-users wouldn’t be held responsible for off-spec diesel because compliance would be enforced at the point of sale, the report from the conference suggested carriers and owner-ops might in fact face penalties for misfueling.

“Our understanding is that if drivers put the wrong fuel in the engine and aren’t complying with the EPA standards, the fleet is liable for a $32,000 fine per incident,” Bear Stearns reports.

Most OEMs say that non-15 ppm would not immediately damage the engines, but off-spec fuel in the new engines will quickly clog up at diesel particulate filter, and prolonged could put the equipment out of service, and worse, potentially void the engine warranty.

From a pure production standpoint, ULSD is expected to only cost about $0.05/gallon more to make than current 500ppm diesel, however, that price does not include the cost of getting it to the end user still at 15ppm. “The ultimate cost to the end user will depend entirely by market dynamics,” the report stated.

As for fuel economy expectations, the new ’07 engines are reportedly neutral with previous ’04 models. However, because of the new fuel’s lower energy content, there might be as much as a 3 to 5 percent fuel efficiency hit with the engines running on ULSD.

All these risks could exasperate the expected new truck market slowdown after January ’07, says Bear Stearns. “From a fundamental perspective, we are concerned with, first, the availability and pricing of ultra low sulfur diesel toward late 2006 and worse-than-expected fuel degradation on the 2007 engines, both of which we believe will exacerbate fleets’ concerns about buying the 2007 engines,” the firm stated.

Read everything you need to know about the required ULSD and the new engines the fuel will be used in conjunction with in the upcoming April issue of Today’s Trucking magazine.