Fuel Specifications Explained
You may think that all fuel is alike – but it’s not. So, what exactly is fuel specification?
Here are several examples:
- Texas has its own form of ultra-low-sulfur diesel that it sells at the rack.
- In California, Arizona and Nevada, there are several “boutique” gasoline and diesel fuel grades that are completely different from any other part of the United States.
- Heading east, gasoline buyers must worry about Reid Vapor Pressure (RVP) in the summer months.
If you are a multi-state buyer, like a fleet, or a truckstop chain, it is especially important to know if you are pulling the correct fuel – and referencing the right one in your supplier contract.
This all means that you need to be well-versed in fuel specifications.
Specifications for Gasoline and Diesel Are Key in Supply Contracts
Bottom line: the fuel contract a buyer writes with a supplier must be fuel-spec specific.
Why? Not referring to the right fuel can cause nightmares for anyone who is trying to be compliant or is trying to verify the prices they are being charged are correct.
Let’s pretend you own a truckstop near Houston and are writing a contract for diesel supply. Your supplier contract cannot simply reference: “The cost of fuel is the OPIS ULS diesel price at the Houston, TX., rack.” That’s too vague.
Because Texas requires LED (low-emission diesel), the price point in your contract must read: “The cost of fuel is the OPIS ULS LED diesel at the HoustonTX., rack.”
Here’s another example. If you buy gasoline for your fleet in the state of Virginia, you must find out whether your fuel delivery is an RVP-designated area.
As we learned in How To Read Your Wholesale Rack Report, RVP measures gasoline pressure and is mandated to specific levels at various times of the year by state and local governments as an ozone-control mechanism.
If you are pulling fuel from an RVP-designated market, the wording in your contract must read: “The cost of fuel is the OPIS Low RVP unleaded gasoline price during the months of May to September.”
Being knowledgeable on fuel specifications is essential for paying an accurate price on your fuel. For complete information (150+ pages) on nationwide fuel specifications and state-by-state breakdowns, OPIS recently released its fully updated 2018 Fuel Regs & Specs Handbook. Go here to get your copy.
State-by-State Fuel Standards: Know Your Market
As we discussed in Wholesale Rack Fuel Pricing Essentials, different U.S. states require different fuel specs. There is no such thing as “just gasoline” or “just diesel.” Fuels vary depending upon the rack and what formulations are mandated in a state or county – largely based on whether an area has been deemed high in pollutants.
What makes this difficult for, say, a fleet is that fuel is not “fungible,” meaning there’s little or no interchangeability in the market. So, it’s imperative to know exactly what fuel is required in each market covered by a multi-state buyer.
Having a thorough understanding of current fuel specs is critical for anyone that manages a fuel spend. You need to know what the requirements are in your market – because they differ state-by-state and because they can change over time. Plus, penalties for non-compliance could result in your business owing stiff fines.
But have no fear. OPIS’s 2018 Fuel Regs & Specs handbook details fuel specification requirements in state-by-state format and is filled with information on other key topics including:
- RFG areas and low-RVP programs
- Renewable Fuels Standard requirements
- Ultra-low-sulfur highway diesel standards
- State-by-state fuel taxes
Here’s an example of the type of granular data you will see in the handbook. This is the RVP rundown for California:
RVP: In summer (RVP-control) months, the RVP reference limit is 7.00 psi. “Summer” varies for different regions, as shown below. However, if a producer or importer uses the CaRFG Phase 3 Predictive Model to certify a final blend that does not contain ethanol, the RVP reference limit is 6.90 psi. The RVP cap limit is expressed as a range: minimum RVP is 6.40 psi, and the maximum RVP is 7.20 psi. These limits apply at the terminal and retail level during the RVP control periods for each region of the state, as listed below:
April 1-Oct. 31 – South Coast Air Basin, Ventura County; San Diego Air Basin; Mojave Desert Air Basin; Salton Sea Air Basin.
May 1-Sept. 30 – Great Basin Valley Air Basin.
May 1-Oct. 31 – San Francisco Air Basin, San Joaquin Valley Air Basin; Sacramento Valley Air Basin; Mountain Counties Air Basin; Lake Tahoe Air Basin.
June 1-Sept. 30 – Lake County Air Basin; Northeast Plateau Air Basin; North Coast Air Basin.
June 1-Oct. 31 – South Central Coast Air Basin, excluding Ventura County; North Central Coast Air Basin.
Also, producers and importers must comply with the RVP limits shown above one month before the time frames, in order to facilitate transition to lower-RVP gasoline.
This is just part of the specifics you will get on this state (and every other in the United States) in your Fuel Regs & Specs book. Be sure to pick up a copy for your office so you have a quick reference.
Plus, as a thank you for being a blog reader, we’ve set you up with a 50% discount. Enter promotional code REGS1 during checkout. Order your discounted handbook here.