Fueling Efficiently

There was an interesting and telling contrast last week at the meeting point between business and politics.

No, it wasn’t the contrast between Standard & Poor’s, basic math and essential credibility.

What we’re talking about is the transportation industry response to new fuel-efficiency standards for heavy-duty trucks the White House issued last month. In contrast to the hue and cry that greeted similar proposed rules for automobiles and light truck, the business world generally applauded new requirements that will add something like $8 billion in direct capital costs and set tough, new limits on greenhouse gas emissions.

The transportation industry has bristled and even battled over environmental regulations over the years, but American Trucking Associations President and CEO Bill Graves and Engine Manufacturers Association President Jed Mandel joined President Obama at the White House announcement of the new standards.

“Our members have been pushing for the setting of fuel efficiency standards for some time, and today marks the culmination of those efforts,” Graves said.

If you were expecting condemnations and pledges to fight the new regulatory efforts, you haven’t been paying attention to the transportation industry’s approach to environmental standards in the United States and around the world. Rather than lining up almost reflexively to new rules, more carriers and carrier groups across the shipping spectrum are working with regulatory bodies on environmental improvements that can be achieved, measured and sustained while maintaining the underlying movement of commerce.

That’s been true on highways, at U.S. ports and, increasingly, in the global shipping arena, as my colleague Peter Tirschwell notes in his commentary this week on discussions at the International Maritime Organization to set new standards for oceangoing vessels.

Why is there all this agreement — quite literally back-slapping at the White House announcement — on an issue that’s been so contentious? To paraphrase that cliché about politics, it’s the fuel economy.

Against that $8 billion in costs for new trucks with more efficient engines is what the administration estimates will be $50 billion in savings on fuel costs that will come from eliminating some 530 million barrels of oil by 2018. The standards will add about $6,220 to the cost of a tractor-trailer, but that truck will cost about $73,000 less to run during its operating life by improving fuel efficiency up to 23 percent.

And that is the calculation that is looming larger in supply chains that have seen costs squeezed to bare minimums and in transportation operations facing tough price competition and tight margins. It’s the calculation, in part, that led Maersk Line to order the mega-ships it calls “Triple-E” class partly because of the 35 percent improvement in per-container fuel efficiency the vessels will bring.

Still, those cost calculations are not necessarily the same across the competitive spectrum. Just as Maersk’s big buy pressures smaller operators that don’t have Maersk’s deep pockets, the higher costs of new trucks will squeeze smaller carriers that can’t easily absorb higher capital costs.

But the new U.S. standards come with a long lead time of seven years, allowing manufacturers and smaller carriers a period to adjust. You should also expect the rest of the world to adjust over that time, and adopt the new fuel efficiency standards.

Paul Page is executive director of The Journal of Commerce. He can be contacted at 202-355-1170, or at ppage@joc.com. Follow Paul Page on Twitter, www.twitter.com/paulpage.
 

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