How will upcoming regulations effect you?  Right in your wallet I suspect.

New Study Finds Huge California-Only Fuel Premium From GHG Programs

The California Trucking Association (CTA) has released a study showing significant job losses and dramatic fuel cost spikes directly attributable to California Air Resources Board’s (CARB) fuel policies. Goods movement and agriculture sectors will be especially hard hit if the policies are allowed to go into effect as currently designed.

The study, titled “The Impact of the Low Carbon Fuel Standard and Cap-and-Trade Programs on California Retail Diesel Prices“, prepared by Stonebridge Associates, Inc. finds that by 2020 CARB’s Low Carbon Fuel Standard (LCFS) in combination with the AB 32 Cap-and-Trade Program could increase the price of diesel fuel by $2.22 per gallon.

That would represent more than a 50 percent increase in the price of diesel fuel and a shocking $6.69 per gallon at the retail pump. The average price difference between California and neighboring states would be $2.33 per gallon when accounting for taxes.

According to the study, between the year 2015 and 2020, these higher “California-only” diesel fuel costs will cause a loss of nearly 617,000 jobs in the containerized import sector, $68.5 billion in lost state domestic product, $21.7 billion in lost income and $5.3 billion in lost state and local taxes.

California’s transportation and logistics industry is responsible for almost 14% of the state’s economy and is an important source of reliable good paying jobs in this state. However the study states that a “California-only” diesel price caused by CARB’s poor program design will put California’s transportation sector at a significant competitive disadvantage.

The report goes on to say that these diesel fuel price increases of this magnitude will cast an even wider net affecting food, fuel, clothing and other essential services transported by trucks.

“It simply makes no sense that here in California where we wake up every day to double-digit unemployment, businesses struggling to keep their doors open or wheels turning that CARB would intentionally impose policies that makes fuel more expensive,” said Michael Campbell, Executive Vice President and CEO of the California Trucking Association. “Higher fuel prices create an incentive for companies to fuel up outside of our state costing us jobs that provide for our families and critical tax dollars that fund our roads and transit programs.”

The report can be downloaded at http://caltrux.org/LCFS.

Bobby Fleet Manager Wall California Fuel, CARB, diesel, fuel price increases

Thought this was interesting:

April 13th, 2011

Goldman Sachs rocked oil markets for a second day Tuesday by calling for a nearly $20 fall in Brent crude oil, saying speculators had pushed prices ahead of fundamentals. It was the second warning of a steep market reversal from the long-term commodity bull in as many days. On Monday, Goldman recommended clients close a trade heavily weighted toward U.S. crude futures.

I’ve never been one to say that speculators are the primary driver of oil price fluctuations. Fundamentally, we are at or near the peak in conventional oil production — and that means oil prices will inevitably see higher highs and higher lows (See Science: “Peak oil production may already be here”; HSBC Bank: Oil will be gone in 50 years). And obviously we have a unique amount of unrest across North Africa and the Middle East.

But if the world’s biggest commodity trader commodity trader says speculation is playing a role, one has to listen — especially since Goldman has been predicting higher oil prices for longer than most:

Goldman was one of the first banks to predict $100 oil last decade, in March 2005 when prices were closer to $50 a barrel.

On Tuesday, Goldman chief energy analyst David Greely said the recent run-up in prices, in which Brent rallied as much as 33 percent since the start of the year, looked overdone.

“While prices are back at levels of spring 2008, supply-demand fundamentals are significantly less tight,” Greely said in an April 12 note emailed to clients.

“We believe that the market will experience a substantial correction toward our $105 a barrel near-term target for Brent crude oil in coming months,” he stated.

Oil prices were down sharply, with Brent shedding more than $3 to settle below $121 a barrel. On Monday, prices hit a 2-1/2 year high of $127.02 before reversing….

Goldman analyst Greely said that while unrest in the Middle East and North Africa remains a risk to oil markets, with Libyan exports already largely cut off, the price had been pushed too high by the large number of speculative traders currently long crude oil.

“Both inventories and spare capacity are much higher now and net speculative positions are four times as high as in June 2008,” Greely said.

Exactly how much speculation is driving up oil prices remains contentious:

Goldman estimated in a research note on March 21 that every million barrels of oil held by speculators contributed to an 8 to 10 cent per barrel rise in the oil price.

As unrest spread in North Africa and the Middle East, investors accumulated the equivalent of almost 100 million barrels of oil between mid-February and late March on top of their existing positions, adding approximately $10 to the ‘risk premium’, Goldman said.

Using Goldman’s 8- to 10-cent estimates and data on speculators’ positions from the U.S. Commodity Futures Trading Commission, Reuters calculated that as of last Tuesday, the total speculative premium in U.S. crude oil was between $21.40 and $26.75 a barrel, or about a fifth of last Tuesday’s price. The UK’s Financial Services Authority (FSA) does not publish trader data on Brent.

Goldman Sachs disputed the Reuters calculation on speculative premium.
Source: climateprogress.org

So according to the fundamentals the price per barrel should be around $70 to $90 which would put street prices in the $3.25 unl $3.40 dsl range.

Current price per barrel:

Bobby Fleet Manager Wall diesel, economic recovery, fuel price increases

Ok, hang on a second…I will be right with you…one more second…whew, who knew wrestling the soap box away from my dad would be such hard work.  Here it is and here I stand.  It has been some time since we have had much of interest to rant, I mean talk, about, but leave it to the California Air Resource Board , to strike again.

Many of you will remember that gas stations around the state had to “upgrade” their vapor recovery system by April of 2009 in order to catch a minute amount of additional vapors at the pump.  As part of this upgrade we were required to install CARB “certified” nozzles. Not to bore you but, there were two possible systems certified to meet the requirement, the balance system was installed in 30% of the stations and the only nozzle certified for use with that system was made by a company named VST. 

So when a mandated, certified, “commercially available”, more expensive, lesser warranted nozzle does not work….Well, you go to the other certified nozzles, right?

Ahhh, my mistake there is no other certified nozzle that works with the balance system….So now what do gas station operators have to do with the 35,000 nozzles in CA?  Well according to CARB and the State Fire Marshall, we have to remove the hold open latches on our existing $300 nozzles. We can then get in line to turn those nozzles in for $100 credit towards a $300 newly “certified” nozzle.

In the mean time, as of October 15^th, 2010,  every one of us trying to fuel at an affected station will have to stand by the tank and hold the nozzle open…

As if we didn’t hate to get gas enough…

My Best, Mary

Mary Fleet Manager Wall California Fuel, CARB, fuel price increases, fuel purchases, Gas Stations, Vapor recovery, VST

In the diesel fuel business, it is all about pennies.  Fifteen, twenty years ago a price increase of a penny was a big jump and there were sequences of days when fuel prices did not change.  So, when I saw the video on the link below about the National budget it really struck a chord.  I get pennies and often spend time on the far right side of the decimal but when you get up in the millions, billions and trillions frankly it is harder for me to conceptualize.  I thought this would be a great way for my kids and their friends, not to mention my coworkers, to understand the numbers we are hearing about in the news.

What I did not expect is one of the responses I got back from a friend of mine.  She requested that I not send her any more political emails. Now, I admit, I can get on my dad’s soap box and rant a bit with the occasional unsolicited opinion about the current world order.  What a scary realization- I did not even notice a political bend to the video.  If you click on the link it does show the President pledging to reduce the National budget by $100,000,000. My first response was applause and frankly, so was my last response.  (Again I like pennies, so saving even a $0.0025 is good by me!)  What my friend, who tends to lean a little more left then I do, saw in the first 15 seconds was an attack on the President and that framed her opinion of the video, not the remaining minute, twenty three seconds.

I have watched it a number of times and if it were done 3 years ago and the President at that time was featured in the first 15 seconds, I realize that I would have considered it political too.  This would have been compounded by the fact that my leftward leaning brother-in-law is the one who shared it with me!  It really is just a great learning tool.  I am a huge fan of learning, but realize my genetic skepticism would have made me miss this opportunity too.  What a great lesson for me about education.   Information is good, regardless of who shares it with you.  I still applaud budget cuts wherever we can get them, especially since we just sent in our latest donation to the state and federal government…. don’t even get me started….

 http://www.wimp.com/budgetcuts/

My Best, Mary

Mary Fleet Manager Wall DeWitt, diesel, economic recovery, fleet, fuel price increases, petroleum, policy

Recent news articles have indicated that the current increase in fuel prices is a precursor to economic recovery. Thankfully, fuel prices are nowhere near last year’s peak prices. Remembering what last summer’s run up in fuel prices did to our customer base and our credit line, I am a little more wary. Not afraid to hope, but definitely settling in for a longer road to recovery.

When we did our Budget for 2009, we threw many darts and came up with numbers that looked “reasonable” given the current economic conditions. Reasonable volume numbers, reasonable labor costs, and reasonable expenses. We followed a long standing philosophy of being conservative – inflating expenses and minimizing gross profit. Given what happened the second half of 2008, we were VERY conservative.

Tomorrow, I will sit down with our company managers to review how we are doing this year. Look at key metrics used to judge our business and compare our budget numbers to our actual financials. In preparation for that meeting, I asked John, our controller, to do a mid-year modification on two items: fuel expense and credit card fees.

At first blush, we all feel great. We have over estimated the cost of fuel for this year, leaving us significantly under budget on fuel expense for our 30 trucks. In addition, credit card fees are a large expense at our retail locations and we used our fuel cost estimates as a basis for our budget. The problem is these line items were masking other areas where we are OVER budget. We can all agree, this is not the time to be OVER budget. So John is adjusting the numbers.

In all likelihood, we will miss the goal for May. But, it is important that we do not lose focus on what we set out to do this year:

1. Year to dig in, support our customers through a high level of service;
2. 2009 is a year to watch our expenses;
3. 2009 is a year to count our pennies;
4. 2009 is a year to look for the light at the other side. We are catching glimpses of it, but as the bankruptcy filling of General Motors reminds us, we are not out of the woods yet.

What are you doing this year?

Mary Fleet Manager Wall cost of fuel, credit card fees, economic recovery, Fuel Budgeting, fuel expense, fuel price increases