By Cain Adams
Trinity Logistics/Longboard Logistics
You have seen it. A truck powered by diesel pulls up next to a Tesla at the stoplight ahead of you and hammers down on the throttle, sending black smoke rolling over the Tesla which just sits there and eats it.
Yep, it is immature, but it’s become a “thing.” Some Americans love the sound of a big motor or the coffee can tailpipe. Others want to drive an electric car for different reasons – tax credits, variable fuel prices seen, or a feeling of saving the planet one car at a time. America was built swiftly due to the combustion engine. We should be grateful it came when it did.
In the 1850s oil was frowned upon. Water wells were being abandoned due to the black sludge interfering with what was being sought after. 1862 rolled around, and John D. Rockefeller purchased a refinery. By 1870 he had a little company named Standard Oil up and running. This guy used to sell oil just to lubricate parts.
Then, Rockefeller figured out he could call oil a fossil fuel so it would seem scarce. Boom. Everyone was on the hunt for oil. It was perfect timing. On Jan. 29, 1886, Carl Benz applied for a patent for his “gas-powered vehicle.” Sure, it had three wheels, but Mercedes Benz was born and needed a fill-up.
Car and Driver magazine says in the 1830s the first electric motorized carriage was built and used in Scotland! All through the 1800s inventors were interested in electric-powered vehicles. In the early 1900s New York even had battery-swapping stations for taxi cabs. Six hundred electric cabs operated in New York, Boston, and Baltimore. Imagine that! Well, the business tried to expand too fast and fell flat on its face. By 1907 it was gone. We kind of see the same thing happening now, don’t we?
Diesel fuel, per gallon, is higher than we have ever seen it. The supply of emergency distillate fuels (diesel, jet fuel, and heating oil) has not been this low since 1982. Why? There are four major reasons. First, Russian oil imports used to be around 700,000 barrels, refined, per day or 21,000,000 barrels a month. Gone. Secondly, this time of the year is harvest. Farmers burn a lot of fuel, and it creates a shortage in the spring and fall. Thirdly, U.S. refineries are trying to do maintenance in the spring and fall, so capacity is reduced. Oh yes, and we cannot forget the closing of refineries.
According to the Institute for Energy Research, another U.S. refinery is planning to close by 2024 and maybe earlier, joining six others that have already shuttered. A Houston refinery is slated to close in 2023 due to the financial burden of upgrading its infrastructure and advancing its decarbonization goals pushed by the Biden administration. The U.S. refining industry has already lost 800,000 barrels of production over the last several years and this closure will add over 200,000 barrels per day to it. The previous refinery closures largely reflect the impact of reduced demand due to the COVID-19 lockdowns on the U.S. refining sector.
In 2020, the pandemic contributed to a substantial decrease in demand for motor fuels and refined petroleum products, which put downward pressure on refinery margins and made market conditions more challenging for refinery operators. I wish we saw that coming.
We do have options though. Let us think about some. Imagine if we as a country were to create an agenda to work from home a bit more. Companies could be asked to have their employees work from home. Maybe they would get recognized for their fuel reduction efforts which would then inspire other companies to follow. Residents could be asked to reduce their oil consumption and get better pricing if they do so. The government could take the Biden agenda off the table for another two years. This would allow time for the Ukraine conflict to end.
Close all drive-through windows for a month. This is not a popular option but how many sit in a line instead of walking into a location to get their items?
Overall, we know electric grids are not ready to handle electric power needs. California is asking to have an option of keeping the Diablo Canyon power plant open longer than the 2025 shutdown date. States are watching California. If California forces its residents on the PG&E grid faster than they can grow, will it be as the New York cab companies did? Who runs before they walk? Grid first. Agenda second.
The oil reserve was created because of the Arab oil embargoes against the United States following the 1973 Yom Kippur war. Jimmy Carter had the right idea. Build a supply and use it in the event of severe supply disruptions. The Bush administration understood this and said it was not to be depleted to bring down prices. Why in the world are we doing this? Why, at a time of inflation, are we trying to reduce fuel pricing? If America is to reduce inflation, then we need to feel the pain. Yep. I said it. We need to feel pain to slow down on buying. Some of us have slowed down. The less we all spend the faster we will slow down, thus no need to increase interest rates. Inflation and oil. They do not mix well.
Carriers are going to get hurt over the next year. We will not be able to add oil to the reserve until late 2023 or when the Ukraine conflict ends. The Arab nations will not lower the cost per barrel. They now have electric cars as competition, and the more money they can make per barrel now will offset what they cannot make in a future full of electric vehicles.
I just wish those at the top would use their voices for the American people. Three words. “Slow down, America.”
In the next few months, pricing will increase, per mile, but not as much as last year. Your sales staff should stay conservative with freight pricing but be on top of weather conditions. There will be fast upticks when interstates close. Do a daily check at troublesome spots like La Grande, OR, Laramie, WY, Billings, MT, and Dunsmuir, CA. Flatbeds are being put away, so more pressure will be put on reefers. Weather will impact rates more than anything.
More trucks will push to areas where rates are higher per mile. This winter, trucks will take more risks because they must.
Fuel prices will not be coming down for some time but should remain stable. We have enough diesel if refineries do not break down. If this happens, the Northeast will feel the pinch first. A global economic slowdown will also help stabilize fuel pricing. China should see less demand for goods meaning fewer ships will be needed.
Those who roll coal may be looking at their fuel gauge and thinking again. Tesla drivers may look a bit happier. Cheers and thanks to all of you for making a difference. You are appreciated. and without you, there would be less holiday cheer. Many thanks.