February 25, 2010
Diesel Fuel Sulfur Levels Change Again in Second-Half 2010
The federal Environmental Protection Agency (EPA) will soon enforce another reduction in sulfur levels of diesel fuel affecting all parties across the supply chain in the second half of the year.
WHAT'S CHANGING?
--Sulfur levels of most -- not all -- non-road (NR) diesel fuel sold in the U.S. will be reduced from 500 ppm to 15 ppm ULSD. Locomotive and marine (LM) diesel fuel may remain at 500 ppm sulfur until 2012.
--Refiners and importers may no longer produce or import on-road diesel fuel above a 15 ppm sulfur, which means that 500 ppm highway diesel fuel will gradually go away.
--Alaska's rural areas switch from high-sulfur diesel to ULSD for both on- road and non-road diesel including locomotive and marine diesel.
TIMELINE
Refiners and importers will make the switch on June 1, 2010, terminals have an Aug. 1 compliance date, and marketers comply by Oct. 1 so that the fuel begins to reach end users by Dec. 1.
Note: Some small refiners may continue to produce higher-sulfur diesel fuels outside of the U.S. Northeast Mid-Atlantic Area (NEMA).PUMP LABELS
The changing regs also mean marketers need to review whether they are using the correct pump labels: the NR ULSD must be labeled as NR 15 ppm, and ULSD replacing the outgoing 500 ppm highway diesel fuel must be labeled as 15 ppm highway diesel fuel. If NRLM diesel is 500 ppm, it must be labeled as such. If NRLM fuel is 15 ppm, labels should say so.
The labeling requirements apply to retailers and wholesale purchaser- consumers, but don't necessarily mean that they will have to replace their current pump labels. ULSD non-highway diesel fuel labels that are in use now are acceptable for the 15 ppm NR diesel fuel.
In areas outside of NEMA where small-refiner-produced NRLM fuel must meet at least a 500 ppm standard by Oct. 1, some pumps will need re-labeling. For example, pumps that were labeled high-sulfur fuel, suggesting that there is no limit on sulfur, will need to be labeled as 500 ppm fuel. No HS NRLM labels are allowed in these areas after Oct. 1, says EPA.
It's unclear how many pumps outside of NEMA are already labeled 500 ppm fuel.DYED FUEL
EPA no longer requires that non-road fuel be dyed red, though IRS still requires the use of dye for tax purposes. However, outside of NEMA, all 500 ppm LM fuel, as well as heating oil, must contain yellow dye, so that it doesn't get commingled with lower-sulfur NR fuel, says EPA.
Exception: no dye is required for heating oil or LM delivered directly from a refinery to an end user outside of NEMA or in Alaska via barge or pipeline.MARKETERS
Marketers may need to change some labels and revise wording on product transfer documents and invoices to reflect sulfur changes. But otherwise, the transition to lower sulfur non-road fuel shouldn't be difficult, say experts.
"This change will not have a significant impact on marketers," said Mark S.
Morgan, attorney for Petroleum Marketers Association of America (PMAA). "PDTs and dispenser label requirements have changed repeatedly over the past few years under the ULSD program. Marketers have learned how to make these changes more adeptly and with little disruption."
In the next winter blending season in late 2010-2011, NR ULSD will need to be blended with 15 ppm kerosene, and may require the use of different winter additives, but Morgan said he didn't see this shift as a problem.
"As marketers have become more adept at making these transitions, we assume the suppliers will be prepared as well. As part of our ULSD compliance efforts, PMAA will get the word out to marketers to contact their suppliers about the availability of 15 ppm kerosene in advance of next winter."
Availability of ULSD is not an issue. An EPA pump survey showed that 99.4% of highway diesel pumps dispensed ULSD in the fourth quarter of last year.
Make sure your dispensers are clearly marked with the proper pump labels. You can purchase pump decals from OPIS for as little as $.99 cts/decal. The minimal cost for the decals is worth knowing you are EPA compliant. Remember, violators of the NRLM rule can be fined up to $37,500 per day per violation. To order your pump decals please visit http://www.opisnet.com/market/decalulsd.asp. |
January 13, 2010
Gulf Acquires National Rights to Flag, Targets Chevron/Texaco Jobbers in Rebrand Push
Gulf Oil has acquired the exclusive rights to the Gulf brand throughout the U.S. and now plans to target marketers who supply the 1,100 or so Chevron- and Texaco-branded stations that are slated to be debranded by June 30
this year.
Until now, Chevron has owned the rights to the Gulf name outside Gulf's 11- state Northeast market, where Gulf Oil LP had a licensing agreement for the flag. Price-tag on the deal is face-down, but Gulf acquires all rights, title and interest to the Gulf brand.
Gulf will immediately target jobbers along the Colonial Pipeline, so the first expansion of the Gulf flag is likely to include market in Maryland, Virginia and the Carolinas, as well as portions of Tennessee, where Chevron plans
to withdraw, sources say. Gulf COO Ron Sabia and Gulf senior VP for marketing Rick Dery will lead the
expansion effort.
There are no restrictions on the purchase, so the Gulf flag could fly in all 50 states if Gulf could manage such a marketing feat. Dery says the company has behaved like a national marketer even when it was confined to the 11-state northeastern region. He cites "unparalleled growth" in the Gulf station count and a sharp improvement in the quality and caliber of the company's retail portfolio.
The early focus of the effort will be in areas around Gulf's existing branded markets, which currently stretch from Maine to Delaware. The company, which also started selling unbranded fuel in Maryland and Virginia last year, is not expected to have much trouble expanding to other supply points on the Colonial Pipeline. Gulf also will take a good look at Kentucky and West Virginia, two markets where a large number of Chevron and Texaco stations are due to be debranded.
The Gulf name is still recognized across a broad swath of the country.
Gulf's parent company, Cumberland Farms, owns a chain of stores in Florida, and could use the Gulf name to make a brand push into the Sunshine State.
However, sources say Cumberland and Gulf are not looking to purchase real estate or acquire direct dealers -- any move into additional states will come through distributors.
Chevron and Texaco stations marked for withdrawal include a lot of high- volume sites that consistently fetch margins several cents above rival unbranded and branded companies. Chevron's market withdrawal includes sites in Delaware, Indiana, Kentucky, New Jersey, the Carolinas, Maryland, Ohio, Pennsylvania, Virginia, West Virginia and the District of Columbia, as well as all but 20 southern counties in Tennessee.
Stay on top of the market right from your desktop throughout the day with OPIS Intraday Email Alerts. Go here to receive early warning of changing oil dynamics, price changes and supply shifts FREE for the next 5 days. |
January 4, 2010
Multibillion-Dollar Storage/Pipeline Company Turns to Rack Marketing
Pipeline and storage giant Plains All American Pipeline is expanding its reach into various downstream wholesale markets, Oil Express sources confirm.
The company is now marketing unbranded light fuels in Tampa and Taft, Fla., as well as other southeastern and Gulf Coast locations.
The company declined to comment on its business plan at the rack, but marketers say that the firm is moving toward more trading and marketing to complement its low risk transportation and storage business. Snazzy powerpoint presentations circulated among jobbers have noted that the company has assets worth nearly $10-billion that include 17,000 miles of pipe; 85-million bbl of storage; 1,700 railcars; 600 trucks; 65 barges and 36 tugs. The Houston based master limited partnership (MLP) employs about 3,300 persons in 40 U.S. states and five Canadian provinces.
It owns products' terminals in the Philadelphia region as well as northern California, but so far, there are no reports of rack sales at those points.
The year has seen other MLPs such as Buckeye, Enterprise, Sun Logistics and Enterprise Products Partners advance initiatives in downstream trading and marketing.
Stay on top of the market right from your desktop throughout the day with OPIS Intraday Email Alerts. Go here to receive early warning of changing oil dynamics, price changes and supply shifts FREE for the next 5 days. |
December 18, 2009
OPIS Biodiesel Rack Display to Reflect Tax Credit Expiration
OPIS biodiesel rack display will no longer show the $1/gal federal blenders
credit if Congress fails to extend the incentive by midnight ET, Dec. 31.
Although biodiesel industry groups are attempting to attach an extension to
various legislative initiatives, it appears Congress will recess for the year
without renewing the credit.
OPIS expects the credit will be reinstated retroactively to Jan. 1 sometime
in 2010, but for now, OPIS is making preparations for the possible expiration
of the dollar tax credit.
OPIS currently creates a tax-adjusted OPIS Biodiesel Market Index (OMI)
and a non-tax-adjusted OMI index. Beginning Jan. 1, 2010, both these indexes
will essentially be non-tax-adjusted, so the bottom line index numbers will
look similar. OPIS will not change its OPIS headers, however, believing the
credit will come back.
Currently -- prior to the expiration of the tax credit -- the Tax Adjusted
OMI value is created by factoring out the $1/gal tax credit on B100 products
where a price is not available for blended biodiesel. For instance, if the
price for B100 is $3.00/gallon, currently the Tax Adjusted OMI for B99 is
$2.00/gallon. If the tax credit were to expire, the OMI for B99 would also be
$3.00/gallon. So they would be the same number.
OPIS does the reverse to create the Non-Tax Adjusted OMI when there is a
B99 and no B100. Its plan is to continue to create both the Tax Adjusted and
Non-Tax Adjusted OMI, but at a value which will not factor out the
$1.00/gallon biodiesel tax credit.
With the looming possibility of the Biodiesel Blender Tax Credit expiring
and then being retroactively activated, OPIS wants to continue to create the
OMI in the intermediate term because it knows so many of its subscribers
benchmark to these specific numbers, and OPIS wants to keep those benchmark
indices intact.
In the instance a retroactive law is passed and the credit comes back after
its expiration, OPIS will not be recalculating these values historically.
However, OPIS felt it was important for subscribers to understand the OPIS
methodology so they could make any necessary adjustments.
Finally, if the Biodiesel Blender Tax Credit is extended on or before midnight ET Dec. 31, 2009, OPIS will make
no changes.
Gain access to over 10,000 biodiesel prices at more than 180 wholesale rack locations every day from OPIS,
the #1 trusted industry benchmark for fuel buyers and sellers. Incorporating biodiesel into your business
presents many advantages -- Go here to start your 5-day free trial and see for yourself! |
December 18, 2009
Shell Closes Deals to Sell NW Stores, Supply Contracts
After months of talks and some false starts, Shell has finally closed on agreements to sell 80 stations and supply contracts for another 65 sites in the Seattle area. The acquisitions, by two veteran Shell jobbers and two minority businessmen, have been in the works for several months, as exclusively reported by Oil Express.
The biggest package, some 66 stations, went to jobber John Jackson and PacWest Energy, LLC, a joint venture company between Shell and Jacksons Food Stores Inc. Jackson also acquired the right to supply another 31 sites owned by independent dealers. His company, headquartered in Meridian, Idaho, previously acquired 43 Shell sites in Oregon (OE 03/10/08, 01/28/08).
Long-term Shell jobber Craig Eerkes acquired 14 units through his firm, Tri-Cities, Wash.-based Sun Pacific Energy. He also bought the supply contracts for 11 open dealer outlets.
Shell signed the initial agreements with Jackson and Eerkes in June (OE 06/08/09).
The most controversial of the deals involves Allied Fuel LLC, a company co- owned by James Hasty, a former NFL footballer with the New York Jets and Kansas City Chiefs.
Retailers have questioned the choice of Hasty, given that he has no experience in the gas business. Shell made Hasty a jobber in order to pull off the deal. Allied Fuel, based at one point in Hasty's Newcastle, Wash., home, has acquired the right to supply 23 open dealer sites.
State records show Allied Fuel is owned by Hasty and Troy Henry, a management consultant in New Orleans who also controls a business services firm called Henry Consulting. Allied was registered with the state of Washington on Aug. 18. Henry Consulting is one of 14 limited liability firms established by Henry in Louisiana. Most of them are no longer in good standing with the state of Louisiana because they failed to file annual reports (OE 09/07/09). Shell previously sold eight stations in New Orleans to another Henry entity, Infinity Fuels LLC. Those units are now leased to dealers.
Dealers expect Hasty to sublet fuel delivery to Shell jobber Pettit Oil, based in Tacoma, Wash. They believe Henry's New Orleans operation will process credit card and EFT transactions.
Subscribe to Oil Express today and discover what marketers need to know to survive in today's competitive marketplace. Learn proven techniques to cut costs, boost profits and protect your business.
Click here for more information. |
December 9, 2009
Focus Back on Asian Oil Demand Growth
Anumber of oil analysts are refocusing on oil demand growth in Asia as a possible prelude to higher prices in 2010. Goldman Sachs focused on non-OECD - including Asia - oil demand growth when it forecast $110/bbl crude for 2011.
ExxonMobil mentioned Asia when it predicted a 35 percent jump in petroleum usage over the next quarter century.
The U.S. Energy Information Administration (EIA) weighed in with a short- term forecast that predicts oil demand growth in Asia. EIA says that the emerging Asian economies are rebounding from the global economic downturn faster than the already developed economies, making the Asia-Pacific region "the leading driver of global economic recovery and higher oil demand."
The so-called Pacific economies were generally less exposed to financial risks and credit default arrangements than the U.S. and European countries and many of them have strong stimulus measures that are expected to boost domestic demand.
The region's oil demand declined for 4 consecutive quarters during the second half of 2008 and first half of 2009, as a result of severely declining export-led sectors. However, by the third quarter 2009, the region's oil demand was above its level in the third quarter of 2008.
EIA notes, however, that despite the recent uptick in Asian demand, it still forecasts a 2009 decline in overall regional usage, the first annual average oil demand reduction in Asia since the Asian financial crisis in 1998.
China is leading both the Asian recovery and the rebound in the region's oil demand thanks to a $586 billion economic package focused on transportation, infrastructure, and manufacturing.
EIA believes China's overall oil demand in 2009 will be nearly 400,000 b/d over 2008 levels, growing from 7.83 million b/d to 8.21 million b/d. In 2010, EIA anticipates China's GDP growth to top 8 percent, leading to oil demand 4.9 percent higher than 2009, reaching a level of 8.61 million b/d.
That's still 10 million b/d behind current U.S. oil usage, even at today's depressed levels.
India will be the other engine in Asia's regional fuel growth. EIA says that India has demonstrated growth throughout 2009 and it estimates that absolute growth will average 150,000 b/d, lifting the 2009 EIA level to 3.11 million b/d. India will see a growth of another 130,000 b/d in 2010, EIA anticipates.
Other Asian market economies are showing significant turnaround in the latter half of 2009 as their industrial production has picked up some steam.
South Korea, for example, has exhibited positive demand growth, EIA points out.
Two observations that tend to temper EIA's forecast.
Earlier this month, Louis Capital Markets (LCM) issued a "China Syndrome"
special report that stated this: "The prevailing market consensus that China's surprisingly large product demand growth will tighten markets quickly is distracting from a more pressing issue - the threat of China's looming refining overcapacity to OECD refining."
LCM believes that China is on the verge of becoming a much larger exporter of petroleum products, a threat to other world refiners.
LCM is also more cautious about China's oil demand growth. Some of that, LCM observes, could be tempered as China moves more towards market-based pricing by reducing some of this fuel subsidies.
Then there's Japan - the second largest oil consumer in Asia behind China.
Japan continues to show its determination to use less oil as it shifts its economy to more efficient use of energy and employs a more diverse energy mix. There's no oil demand growth coming out of Japan!
Stay on top of the market right from your desktop throughout the day with OPIS Intraday Email Alerts. Go here to receive early warning of changing oil dynamics, price changes and supply shifts FREE for the next 5 days. |
|
