Rajan Wilcox
The purchase of diesel fuel is a highly regulated process, with specific protocols dictating the acquisition and use of this fuel type. Diesel fuel is a common choice for vehicle fleets, and its purchase is often governed by organisations aiming to reduce dependence on imported petroleum. The process of buying diesel fuel involves considerations such as resale value, total cost of ownership, and environmental regulations. Additionally, the fluctuating prices of diesel fuel present a challenge for fleet managers, who must balance the advantages of diesel engines with the higher costs per gallon. The following sections will explore the intricacies of purchasing diesel fuel, including the role of government regulations, cost-benefit analyses, and the impact of alternative fuel options.
| Characteristics | Values |
|---|---|
| Diesel fuel cost advantage | Diesel vehicles have a fuel cost advantage over gasoline vehicles |
| Residual fuel | A petroleum fuel with a T90 temperature at or above 700 °F. For example, No. 5 fuels and No. 6 fuels are residual fuels. |
| Renewable diesel fuel | Diesel fuel made from renewable, non-petroleum feedstocks that is not a mono-alkyl ester |
| Biodiesel fuel | A diesel fuel composed of mono-alkyl esters made from non-petroleum feedstocks |
| Biodiesel fuel use credit | To receive a credit for the purchase of renewable diesel, the fuel must be produced from non-petroleum renewable sources and registered with the U.S. Environmental Protection Agency |
| Alternative fuel | Pure biodiesel (B100) and pure renewable diesel (RD100) are alternative fuels |
| AFV | Any dedicated or dual-fueled vehicle. A dedicated vehicle operates solely on alternative fuel, while a dual-fueled vehicle can use alternative fuel and conventional fuel |
| Fuel dispenser | A blender pump is a fuel dispenser where PCG is blended with E85 or DFE to produce gasoline with a higher ethanol content |
| Butane blending facility | A fuel manufacturing facility where butane is blended into PCG |
| California diesel | Diesel fuel designated by a manufacturer for use in California |
| Contractual fueling arrangement | Fleets can enter into a purchasing agreement with a privately-owned facility to establish that their light-duty vehicles are "capable of being centrally fueled" |
| Firm fixed pricing | The final award price for fuel purchases is calculated based on the NYMEX Strip Average and other factors, and vendors must hold their firm fixed price per gallon for a specified period |
| Repricing | Agencies have the option to request repricing within 48 hours, and bidders must submit repricing with updated price adjustments while maintaining the original certifications |
| Contract end date | Fuel should not be purchased with the intent of utilization beyond the specified contract end date |
| Diesel engine advantages | Diesel fuel may be safer than gasoline for off-road vehicles, such as fire trucks, and has advantages in cold climates due to variations like Diesel #1 and Diesel #2 |
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What You'll Learn
Fuel quality standards
In the United States, the Environmental Protection Agency (EPA) has implemented standards for diesel fuel used in transportation to reduce criteria pollutants, air toxics, and other harmful emissions. This includes voluntary programs such as the National Clean Diesel Campaign and efforts to reduce sulfur levels in diesel fuel. Additionally, the EPA defines biodiesel as diesel fuel composed of mono-alkyl esters made from non-petroleum feedstocks, and renewable diesel as diesel made from non-petroleum feedstocks that are not mono-alkyl esters.
The Australian Government also plays a role in regulating the quality of diesel fuel sold in the country. The Fuel Quality Standards (Conventional Diesel) Determination outlines the specifications for conventional diesel and blends, while the Fuel Quality Standards (Paraffinic Diesel) Determination focuses on paraffinic diesel, including renewable diesel. To reduce fuel pollutants and emissions, the Australian Government has introduced legislation to decrease the amount of aromatic hydrocarbons in petrol and adjust the start date for the sulfur reduction to 2025.
In the European Union, the Fuel Quality Directive establishes minimum quality requirements for fuels used in road transport. These requirements aim to protect human health, ensure compatibility with vehicle engines, and minimise negative effects on the environment. The directive includes specifications for diesel and petrol fuels, limiting the content of biodiesel (FAME) in diesel to generally 7% and ethanol in petrol to 10%. Member states are responsible for sampling and analysing fuels annually to ensure compliance with the Fuel Quality Directive.
Overall, fuel quality standards are a critical aspect of purchasing diesel fuel, as they ensure that the fuel meets environmental, performance, and health standards. These standards vary by region and are continuously updated to reflect advancements in technology and emissions reduction goals.
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Resellers and distributors
Understanding the Market and Regulations: Resellers and distributors must have a comprehensive understanding of the diesel fuel market, including price fluctuations and industry trends. They should also be well-versed in the relevant laws and regulations, such as the Oil Code of Conduct, which governs the sale, supply, and purchase of declared petroleum products like diesel. This code outlines the rights and responsibilities of resellers and distributors, and it is mandatory to adhere to it.
Supplier Relationships and Contracts: Developing strong relationships with reputable suppliers is essential. Resellers and distributors should carefully select their suppliers and enter into fuel contracts that suit their business needs. Fuel contracts can help lock in fuel costs, manage budgets, and save on overall fuel expenses. There are various types of pricing contracts, including fixed-price contracts, price cap contracts, trigger contracts, and price collar contracts, each offering different levels of price protection and flexibility. It is important to understand your fuel requirements and choose a contract that aligns with your usage and budget.
Product Quality and Standards: Resellers and distributors are responsible for ensuring the quality and compliance of the diesel fuel they purchase. This includes adhering to standards such as those specified in ASTM and ISO documents for diesel fuel grades. In some cases, specific standards may apply, such as "California diesel," which is designated for use in California. Additionally, resellers and distributors should also be aware of the Consumer Rights Act 2015 (CRA), which requires that diesel fuel supplied to consumers is of satisfactory quality and conforms to relevant standards.
Storage and Transportation: Distributors, in particular, need to have a robust system for storing and transporting diesel fuel. This includes investing in suitable tanks and transportation equipment to ensure safe and efficient fuel handling. Distributors must also comply with registration requirements, such as registering with the EPA if they are part of the 500 ppm LM diesel fuel distribution chain.
Customer Service and Satisfaction: Building strong relationships with customers is key to the success of resellers and distributors. This includes providing reliable and timely deliveries, offering competitive pricing, and ensuring customer satisfaction. Some distributors, such as Ricochet Fuel Distributors, have built a positive reputation by offering additional services like on-site fuel tanks and prompt responses to customer queries and special requests.
By following these protocols and maintaining strong relationships with both suppliers and customers, resellers and distributors can effectively navigate the diesel fuel market and provide a valuable service to their clients.
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Fuel transportation
When it comes to the transportation of diesel fuel itself, there are specific regulations in place to ensure safety and compliance. These regulations are set at the federal level and cover various aspects of handling, packaging, labelling, and transportation. According to the Code of Federal Regulations, diesel fuel transportation units must adhere to certain guidelines:
- They must not transport more than 500 gallons of diesel fuel at a time.
- The tanks on these units must be permanently fixed and have a total capacity not exceeding 500 gallons.
- Only one safety can of diesel fuel is permitted on a vehicle, and it must be protected from damage during transport.
- The units and vehicles transporting safety cans must carry at least two multipurpose, dry chemical type (ABC) fire extinguishers, with one on each side of the vehicle.
- When not in use, diesel fuel transportation units should be parked in permanent or temporary underground diesel fuel storage facilities.
It is important to note that acquiring a HAZMAT endorsement is mandatory if you are transporting an exceeding amount of fuel. A HAZMAT endorsement is an additional certification for commercial drivers, particularly those handling hazardous materials. To obtain this endorsement, individuals must meet specific requirements, including being at least 21 years old, possessing a valid Commercial Driver's License (CDL), and undergoing specialized training to handle emergencies and prevent accidents.
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Environmental regulations
The US Environmental Protection Agency (EPA) has been regulating diesel fuel sulfur levels since 1993. In 2006, the EPA began phasing in more stringent regulations to lower the amount of sulfur in diesel fuel to 15 parts per million (ppm), which is known as ultra-low sulfur diesel (ULSD). This fuel is now mandatory for all nonroad, locomotive, and marine (NRLM) engines and equipment, except for some older engines. The EPA's diesel standards target emissions from two sources: nonroad engines and equipment, and collectively, these diesel standards reduce harmful emissions from both on-road and nonroad diesel sources by more than 90%.
To facilitate enforcement of these standards, the EPA combines fuel registration, inspections, a fuel quality testing and reporting system, and stiff noncompliance penalties. The EPA also places liability on refiners, importers, distributors, carriers, resellers, and retail and wholesale purchase-consumers to sell or use motor vehicle diesel fuel that meets the sulfur, benzene, volatility, toxics, and lead contamination standards. An example of an enforcement mechanism is the “Designate and Track" program, which allowed the EPA to track fuel distribution and ensure no party illegally represented non-road fuel as on-road. All non-road diesel was dyed red to facilitate visual identification.
The EPA is also proposing regulatory changes to accommodate the supply and distribution of distillate diesel fuel as global marine fuel. Ocean-going vessels and large ships traditionally used "bunker fuel," which had sulfur levels as high as 50,000 ppm and was a large source of harmful air pollution in the US. The proposed changes will allow the distribution and sale of distillate diesel fuel that complies with the 0.50 percent (5000 ppm) global sulfur standard contained in MARPOL Annex VI.
The Clean Air Act (CAA) gives the EPA the authority to prohibit the manufacture or sale of fuel and fuel additives if there is reason to believe they endanger public health or impair emission control devices on vehicles.
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Pricing and payment
The pricing and payment of diesel fuel depend on a variety of factors, including the location of the fueling station, the taxes and fees levied, and the cost of crude oil, refinery processing, marketing, distribution, and retail station operation.
One option for purchasing diesel fuel is through a fuel contract, which can help buyers avoid the risk of fluctuating fuel prices. There are four main types of pricing contracts: fixed-price contracts, price cap contracts, trigger contracts, and price collar contracts. With a fixed-price contract, buyers agree to pay a specific amount per gallon for a set period, regardless of market price changes. This option provides stability and can help businesses save money if the market price increases. However, it may also result in paying a higher price if the market price decreases for an extended period.
Price cap contracts set a maximum price per gallon, allowing buyers to benefit from lower market prices while being protected from significant increases. Trigger contracts, on the other hand, are activated when the market reaches a certain price level, as agreed upon by the buyer and seller. Price collar contracts combine elements of price cap and trigger contracts by setting both a maximum and a minimum price per gallon, providing protection against extreme price fluctuations.
Another strategy to optimize pricing and payment for diesel fuel is through the use of fuel cards. Fleet managers can utilize fuel card programs to receive discounted prices at participating gas stations. These cards are often connected to a bank account managed by the fleet manager, allowing for controlled spending and easy tracking of maintenance expenditures. By choosing the right fuel card program based on the fleet's specific needs and trucking routes, businesses can maximize their savings and minimize fees.
Additionally, it is important to consider the impact of taxes and fees on the overall cost of diesel fuel. In the United States, for example, the federal excise tax for on-highway diesel fuel is 24.30 cents per gallon, and various state and local taxes also contribute to the final selling price. Understanding these tax implications is crucial for effective budgeting and financial planning.
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Frequently asked questions
The protocol for purchasing diesel fuel depends on the context. For government fleets, the U.S. Department of Energy's (DOE) Alternative Fuel Transportation Program (also known as the State and Alternative Fuel Provider Fleet Program) requires certain fleets to purchase AFVs or reduce petroleum fuel consumption. For private companies, the protocol for purchasing diesel fuel will depend on the company's specific needs and requirements.
An AFV is any dedicated or dual-fueled vehicle. A dedicated vehicle operates solely on alternative fuel(s), while a dual-fueled vehicle is capable of operating on alternative fuel(s) and conventional fuel (gasoline or diesel).
The protocol for purchasing diesel fuel for a private company will depend on the company's specific needs and requirements. Some factors to consider include the type of diesel fuel required (e.g. Diesel #1 or Diesel #2), the quantity needed, and the location of the company.
The Alternative Fuel Transportation Program requires certain fleets to purchase AFVs or reduce petroleum fuel consumption. To determine if your company qualifies, you can refer to the Energy Policy Act (EPAct) of 1992, which outlines the requirements for the program.
