Bracing for Higher Fuel Costs — Again

Trucking companies and the shippers relying on them could see fuel costs take another hit — fired from the bow of the maritime industry.

Lawmakers on Capitol Hill are reviewing legislation calling for tougher pollution standards on cargo and container ships that would require ocean vessels to tap the distillate fuel supply already used by the trucking industry for low-sulfur diesel. Requiring a switch from bunker fuel — considered the dirtiest, highest sulfur fuel on the market — to higher grade distillate fuel could pressure ultra-low sulfur diesel prices upward and sharply increase costs for shippers.

“What powers trucks and planes will soon be what powers ships,” said James Cannon, an alternative fuels expert and president of Energy Futures.

“Demand is very high, and supply is low in the distillate fuel market, and we’re now talking about an entire new industry coming in that’s already bigger globally than the airline industry. Of course, (the trucking industry) has reason to be concerned.”

In 2006, motor carriers began a transition to ultra-low sulfur diesel that cut sulfur emissions by 97 percent from 500 parts per million to 15 ppm. The switch was necessary to support new emissions control equipment upgrades on diesel trucks in 2007 and again next year.

The container lines that feed the domestic trucking industry know that the switch to cleaner-burning fuel is inevitable, but their emissions standards so far have been virtually unregulated. Under current International Maritime Organization regulations, bunker fuel is capped at 4.5 percent sulfur content. By contrast, diesel fuel for land-based carriers in the United States, western Europe and other countries has a sulfur content of 0.1 percent to 0.15 percent.

While some ocean carriers are voluntarily switching to cleaner-burning fuel as they reach port destinations on the West Coast, legislation introduced two years ago by Sen. Barbara Boxer, D-Calif., would have put tighter low-sulfur fuel standards on the fast track. Sulfur content of fuel used by domestic and foreign ships would have been required to be cut from an average content of 27,000 ppm to a maximum of 1,000 ppm by Dec. 31, 2010.

The legislation died before reaching a floor vote, but if tighter maritime legislation is reintroduced and passed this year, an environmentally conscious Congress could put such legislation on an equally aggressive track.