This Editorial appears in the March 5 print edition of Transport Topics. Click here to subscribe today. The news from the oil patch just keeps getting worse and worse. As if $4-a-gallon diesel isn’t bad enough for the trucking industry, now comes a warning from the federal government that ultra-low-sulfur diesel may soon become scarcer and even more expensive in the Northeast because of a string of refinery closings in the greater Philadelphia area.
Editor’s note: Diesel rose 4.3¢ to $4.094/gal., DOE reported March 5.
To hear oil company spokesmen complain that their companies are losing gobs of money refining the very products they sell, and need to close refineries to protect jobs and company profitability, strikes some as downright bizarre.
But that’s what we’re hearing as Sunoco officials explain why they feel the need to close a second Philadelphia-area refinery, after closing one in September.
Sunoco has the refinery on the block, but has warned it will be shuttered if a buyer isn’t found soon for the 330,000-barrel-per-day facility.
Sunoco closed its smaller Marcus Hook refinery in September, and ConocoPhillips shut its Trainer refinery that same month.
Meanwhile, the Energy Information Administration of the U.S. Department of Energy warned that “temporary, localized shortfalls and associated price surges” for ULSD could occur in the Northeast as a result of the closings.
In addition to Philadelphia, a major refinery in the U.S. Virgin Islands that supplied petroleum products to the Northeast was closed last month by another firm, Hovensa LLC. This company is a joint venture of Hess Corp. and Petroleos de Venezuela S.A., the government-owned oil company there.
These developments managed to overshadow the latest surge in retail fuel prices, as the national average price for a gallon of diesel rose more than 9 cents last week to its highest level since May.
Diesel rose to $4.051 in DOE’s Feb. 27 survey of filling stations, the first time it crossed $4 since November. The average is now 33.5 cents above year-ago levels.
Many fleets report this kind of price spiral has a more pronounced effect on their bottom lines, since they are unable to quickly recoup the new costs through surcharges. They pay the steeply higher prices today but don’t collect any more money from their shippers until many tomorrows pass.
At present, fuel prices represent perhaps the biggest dark cloud on trucking’s horizon, just as freight levels are rising to comfortable levels and company profits have returned for most fleets. And worse news could be coming.
