April 2, 2019 | Vol. 69, No. 7
Dear PEI Member:
Do you remember Y2K? As Jan. 1, 2000 approached, people around the world braced themselves for computer outages that were expected to plague the new millennium. Some businesses, banks, utilities, stock exchanges and individuals responded by upgrading or replacing their computer systems. Others elected to take their chances when the clock struck midnight Dec. 31, 1999.
Whether because of good planning, overblown fear or a combination of both, the expected Y2K bang was a bust. Computers mostly kept humming along.
Although not quite at Y2K scale, at least one respected oil analyst is predicting a major disruption of the world’s fuel supply beginning Jan. 1, 2020, including a doubling of U.S. diesel fuel prices from today’s $3.08 per gallon average to $6.00 a gallon or more. If this prediction comes true, PEI members that manufacture, install or service diesel-dependent agricultural or commercial fueling systems could face some challenges.
Dr. Philip Verleger’s concern is IMO 2020, a new regulation from the International Maritime Organization (IMO), a United Nations agency. Beginning Jan. 1, 2020, IMO 2020 requires that the maximum sulfur in the “bunker oil” now powering most oceangoing vessels be reduced from 3.5% to 0.5%.
One of the most respected energy analysts in the world, Verleger’s resume includes a doctorate in economics from MIT and such positions as senior research scholar at Yale, senior staff economist on President Ford’s Council of Economic Advisers and director of the U.S. Treasury Department’s Office of Energy Policy for President Carter. He also was the keynote speaker at the 2010 PEI Convention.
Verleger’s doomsday diesel scenario is essentially this:
by e-mail to the editor, Rick Long at email@example.com
or join the discussion in the Petroleum Equipment Forum
Perhaps most frighteningly of all, the economic harm could lead to political peril. To protect his voters from massive diesel price increases during an election year, President Trump might halt U.S. diesel exports. Such a move would bring even more disruption and uncertainty to the market.
In the past, Verleger’s predictions have been right more often than they have been wrong. For example, he was among the first to predict the 2014 oil price collapse. Nevertheless, most energy analysts take more guarded views of the IMO 2020 threat.
Denton Cinquegrana, chief oil analyst with the Oil Price Information Service (OPIS), predicts any IMO 2020 price disruptions will be both minor and short-lived. John Eichberger, executive director of the Fuels Institute, agrees. In a recent “Convenience Matters” podcast, both said refiners and ship owners facing higher fuel costs are smart enough to develop compensating strategies and, in any case, the fuel volumes affected by IMO 2020 are too small to cause major disruptions.
Our best advice to you and your customers? Treat IMO 2020 like Y2K. Be watchful, but don’t panic. The future will become clear before the clock strikes midnight.
COMPONENT COMPATIBILITY LIBRARY TO AID E15 RAMP-UP
In 2011, the U.S. Environmental Protection Agency (EPA) provided guidance on how to demonstrate compatibility when storing gasoline blends containing more than 10 percent ethanol or biodiesel blends containing more than 20 percent biodiesel.
To demonstrate compatibility, owners and operators may:
As a service to the industry, PEI publishes manufacturers’ statements of compatibility in our UST Component Compatibility Library. To date, 32 manufacturers have posted letters in the library.
To submit or amend a statement of compatibility, manufacturers are invited to visit www.pei.org/ust-component-compatibility-library. The site details the 12 components the EPA considers critical for determining compatibility and provides submission instructions.
INSTITUTE REVIEWS POSSIBILITIES, CHALLENGES FOR HIGH-OCTANE FUEL
“The science demonstrates that when higher-octane gasoline is used in engines designed for it, those engines can deliver greater fuel efficiency and lower emissions,” said John Eichberger, executive director of the Fuels Institute. “Our research team found that a high-octane market could be achieved but would likely require a federal mandate to be successful.”
In addition to summarizing the advantages of high-octane fuel, the reports discuss production challenges, compatibility and the importance of consumer education. You may download the papers, “Transitioning the U.S. Gasoline Pool to a Single High-Octane Fuel: A Baseline Analysis” and “Analysis of the Potential for Increasing Octane in the U.S. Fuel Supply,” here.
PHASEOUT OF GM’S EV SUBSIDIES BEGINS
The GM credit will be reduced Oct. 1 to $1,875, and eliminated April 1, 2020.
GM ceased production of its Chevrolet Volt hybrid March 1, leaving the Chevrolet Bolt as its only current EV model. However, the company plans to roll out 20 new EV models by 2023 and recently announced a $300 million EV manufacturing facility north of Detroit.
LEGISLATORS INTRODUCE BILLS TO COMBAT SKIMMING
Senate Bill 1652 and the companion House Bill 1239 would form a Consumer Fraud, Identity Theft and Skimmer Working Group composed of state cabinet officials, legislators, industry groups, credit-card companies, consumer advocates and fraud victims.
SUSPECTS ARRESTED IN MULTI-STATE SKIMMING SPREE
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The TulsaLetter (ISSN 0193-9467) is published two or three times each month by the Petroleum Equipment Institute. Richard C. Long, Editor. Opinions expressed are the opinions of the Editor. Basic circulation confined to PEI members.