CHICAGO — For fuel in 2019, the fragile and at times exhausting interplay among supply, demand and government objectives was on full display.
Whether easing up restrictions for new fuels or levying additional costs or requirements, government demonstrated that it was truly the third fundamental of fuel economics. Here are five stories that demonstrated this in 2019 ...
E15 gets its waiver
For E15, the 15% ethanol-gasoline blend, 2019 was a breakthrough year. In May, the U.S. Environmental Protection Agency (EPA) granted a long-sought waiver of summertime Reid vapor pressure restrictions to E15. Prior to this, sales of E15 were suspended in most markets from June 1 to Sept. 15 each year. With the waiver in place for the first time in summer 2019, industry groups reported sales of E15 were about 46% higher on a per-store basis, and 150 more sites added the fuel blend.
Other important milestones: More terminals added preblended E15, and New York legalized the sale of E15, opening up the fourth-largest fueling market in the U.S. to the ethanol blend. All told, about 1,900 out of more than 120,000 fueling sites sell E15, revealing a long runway for growth.
With 2020 a big election year, expect the Trump administration to float ethanol sweeteners to win over farm state voters. This could include details on a proposal to “streamline” E15 labeling requirements and remove “other barriers” to the sale.
Electric-vehicle charging gains traction
After years of minor interest in electric-vehicle (EV) charging, convenience-store retailers began piloting the offer in earnest in 2019. Operators such as 7-Eleven, Casey’s General Stores, Hy-Vee, Terrible Herbst, Giant Eagle’s GetGo chain and Parker’s added EV charging stations alongside multinational oil companies such as Shell, Chevron and Petro-Canada. Wawa pledged to more than double the number of Tesla Supercharger locations at its sites by the end of 2020.
RS Automotive, a Maryland automotive shop, removed its gas pumps entirely and installed EV charging stations, grabbing a huge amount of press.
One issue still being worked out is utilities’ role in establishing charging networks. Some utilities have launched programs to install public EV charging station networks (including in partnership with c-store chains). C-store groups have argued that public utilities may get an unfair competitive advantage in jurisdictions that would allow them to charge customers to fund the construction of these charging sites. And demand charges—heavy fees that utilities levy when large volumes of power are drawn during times of peak demand—can destroy the profitability of reselling electricity that is supplied through charging stations.
State vs. federal fuel economy tussle
The Trump administration and the state of California engaged in a battle royal in 2019 over fuel economy standards, a tussle not expected to end anytime soon.
The state received a waiver of federal Clean Air Act standards during the Obama administration that gives it the right to set its own, tougher emissions standards because of its battle with smog. This has proved an annoyance for automakers, who mostly favor one standard because of the cost efficiencies. But after the Trump administration threatened to revoke the waiver and implement a less stringent federal standard, California forged its own voluntary agreement with some of the largest automakers, including General Motors, Honda, Volkswagen and BMW. This in turn triggered the EPA to revoke California’s waiver.
Lawsuits have quickly followed, including two filed by California and a coalition of states against the EPA and National Highway Traffic Safety Administration about the waiver revocation. Major automakers such as General Motors, Toyota and Fiat Chrysler came out in support of the Trump administration’s push for one federal emissions standard, splitting the auto industry.
The Trump administration reportedly might back away from its original fuel economy proposal, which would have effectively frozen fuel economy standards at the 2025 level, and instead require a modest annual increase.
Gas and EV Taxes
As a non-election year, 2019 has been a popular time to pass gas tax increases. Alabama, Arkansas, California, Illinois, Ohio, South Carolina and Virginia increased their fuel taxes, and the governors of others, including Wisconsin and Michigan, attempted to pass an increase but quickly hit political quicksand.
States also increasingly targeted EVs to make up for transportation funding shortfalls. About a dozen states implemented or raised ownership fees on EVs in 2019—even alternative-fuel-friendly administrations such as Illinois. Some have challenged this trend, arguing that with EVs making up only about 1% of the U.S. vehicle fleet, the fees are overly punitive and do not reflect the societal benefits of electrification.
With 2020 being an election year, expect talk of new gas taxes—always a politically unsavory topic—to temporarily fade.
Diesel and IMO 2020
For more than a year, fuel analysts have warned about the implications of new low-sulfur regulation being enacted by the International Maritime Organization (IMO) in January 2020 that will slash the allowable sulfur levels in fuel burned by shipping vessels. Some warned that the drop from 35,000 parts-per-million (ppm) sulfur to 5,000 ppm could trigger a rush for lower-sulfur fuels including on-road diesel and potentially result in diesel prices as high as $8 per gallon.
So far, the dire predictions of $8 diesel don’t seem to be materializing, with a global slump in manufacturing freeing up diesel supply. As Tom Kloza, global head of energy analysis for Oil Price Information Service (OPIS), told CSP in November, “The dog is barking [around higher prices] but it’s a soft growl rather than a yelping hound.”