Tuesday, April 1, 2008

April Fools or Working Class Heroes: The Independent Truckers’ Strike

Your Genteel Moderator begs your indulgence in this departure from genre as he addresses the rumoured independent truckers’ protest against high diesel prices and low fuel surcharges, the means by which they recoup fuel costs. Independent truckers pay full price at the pump for diesel fuel and filling up a semi’s tanks can run to more than a $1000 at the more than $4.00/gallon diesel has been running at for some two months, up between 30% - 40% vs. last year. Despite recent declines in the price of gasoline towards the $3.00 gallon mark for regular, diesel has been headed north. The answer as to why diesel is so much more expensive than gasoline, when the reverse was true for decades, is complex.

A leading factor is the increased cost of producing ultra low sulphur, so-called “clean diesel”, fuel mandated by Federal law for 2009. Indeed according to the Energy Information Administration, diesel refining costs in February went up to 18% of the price of a gallon of diesel vs. 8% for gasoline. This exacerbates a tax differential of $0.06 more per gallon on diesel ($0.244) than gasoline ($0.184). This tax differential is both inexplicable and unacceptable in application to Ultra low sulphur diesel and the fact that, per gallon, there is more energy in diesel than in gasoline making it effectively more efficient. The price is further confounded by seasonal demand for heating oil (a refining and distribution competitor for pump diesel) which coincides with the steep divergence from gasoline prices since October 2007. Finally, according to some pundits, growing world demand for diesel is a factor. Your Genteel Moderator is stumped by this last explanation. As a distillate of crude oil, increasing global demand for diesel should have an impact on the overall price of crude oil, but it is counterintuitive that it should drive diesel prices up vs gasoline prices in the US, especially as diesel engines have yet to make significant inroads in the passenger vehicle market. Refined diesel is not being transported from Europe or Asia to the US, so US distributors are not directly competing with growing diesel demand on either continent. My learned colleagues and I would greatly appreciate information from our readers addressing the mystery demand increase in the US that is allegedly a driving factor in diesel prices.


But back to the truckers. Rumours abound, fueled by CB chatter and internet banter, that an independent trucker protest/shutdown is being organized for this week, with some reports suggesting it will start today. News outlets from TV and Radio to the internet have been touting April 1 as the date for an alleged “Truck-Out” with the modus operandi described as anything from a complete shutdown to trucks simply driving at the minimum posted speed (a fuel saving measure?). A quick check of Route 95 showed no obvious decrease in tractor-trailer traffic and a scan of Channel 19 on a CB turned up references to, but no evidence of, any widespread shutdown today. There is however a good deal of confusion about when this poorly organized, “grass roots” protest is to start, with dates from April 1 to April 23 being stated in various media. There is also a history of previous failed protests dating back to August 2005 when just the same buzz was in the air.


The Bloated Plutocrat had a somewhat complicated view on the matter. “ Fuel prices are too high and are generating inflationary pressure without a doubt. Adventurist foreign policy and poor management of national resources are of course leading factors in driving up fuel prices but so is rising global energy demand. Little can be done about the latter that won’t come home to roost in our pseudo-recessionary economy. But as for those Bolshevik truckers, send out the Pinkertons’ and round them all up. We can’t have every Tom, Dick and Harry in a truck shutting down traffic and stirring up trouble. If Kerensky had had more spine we could have saved all that money wasted on the Cold War!”

Meanwhile the Bleeding Heart also seemed trapped in contradictions. “The truckers certainly have a reasonable concern. Were it not for the administration’s total inability to handle the Middle East and its ‘Might Makes Right’ approach to diplomacy, fuel prices would never have risen so high. Having said that, high fuel prices are a blessing for the environment and to the extent that they help curb emissions and save polar bears, we should be thankful rather than considering protests!”

Your Genteel Moderator must admit to ownership of a diesel vehicle and sympathy with the truckers over the highly divergent prices of gasoline and diesel fuel. One would have thought that excise tax equalization between Ultra low sulphur diesel and gasoline (at $0.184/gallon) would be an immediately appropriate action, followed by diversion of some of the enormous ethanol funding to incentivize increased Ultra low sulphur diesel refining capacity, as well as increased funding to support biodiesel development would all be sensible things that Congress could act on immediately…

1 comment:

smithco1 said...

So that $4 something a gallon I just paid for a gallon of milk isn't going straight to the truckers? What a shocker.