With pandemic news consuming much of fuel marketers’ attention right now, it would be easy to miss some noteworthy developments taking place in the fuel industry. Here are 5 important updates to fuel industry issues that every fuel retailer should know about.
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1. Now is a good time to take care of maintenance and equipment upgrades.
The Petroleum Equipment Institute reports that forward-thinking fuel retailers are taking care of equipment upgrades and required testing work while fewer customers are fueling their vehicles on the forecourt. This approach is less disruptive and safer. It also helps marketers get a jump on impending testing requirements, such as containment sump testing.
2. Credit card companies have begun to issue extensions for the EMV liability shift.
At least two credit card companies have postponed the liability shift from Oct. 1, 2020, to April 2021. The delay comes after several industry advocacy associations – including NACS, PMAA, SIGMA and NATSO – requested the four credit card networks delay the liability shift due to the stay-at-home orders resulting from COVID-19. It is reported that equipment delays, longer lead times and technician availability have impacted EMV migration during the pandemic.
3. The disruption to demand for fuel caused by the pandemic will impact at least two other challenges facing the United States: road funding and what is to become of the Renewable Fuel Standard (RFS).
The U.S. Environmental Protection Agency (EPA) has issued several waivers related to summer-grade gasoline to provide flexibility to upstream parties who, due to the steep drop in demand, have not exhausted their winter fuel supply yet and don’t have the storage capacity for summer blends.
While this step has helped preserve the fuel supply, it has also contributed to low fuel prices. The drop in demand will have wide-ranging impacts on tax revenues for highway and infrastructure funding for every state – from proposed Vehicle Miles Traveled taxes, to reduced gas taxes, to reduced oil taxes in oil-producing states.
Furthermore, with the drop in demand impacting both oil and ethanol producers, the future of the RFS is likely to become even more contentious than it has been in the past.
4. In regulatory actions, new Corporate Average Fuel Economy standards were announced and the EPA stated it will retain current air quality standards.
Vehicle fuel economy and greenhouse gas emissions standards will increase in stringency by 1.5% per year from Model Years (MY) 2021-2026, as compared to MY 2020 levels. This is a drop from the 5% annual increase previously targeted. The new standard is also less than the 3.7% per year reduction in greenhouse gas emissions required in an agreement between California and four major automakers.
In addition, the EPA announced that it is proposing to retain, without revision, the existing primary and secondary National Ambient Air Quality Standards (NAAQS) for particulate matter. This means that more stringent regulatory actions aimed at reducing air pollution resulting from conventional fueling practices is unlikely.
5. Biomass-based diesel (BBD) has become a leading source of alternative transportation fuel and new grants to help fund the expanded distribution of renewable fuels have been announced.
According to a report released by the Fuels Institute, consumption of BBD in the United States has increased rapidly in less than 10 years. Motor vehicle diesel fuel contained an average BBD content of approximately 5% by volume in 2018 compared to 0.5% by volume in 2010. When paired with the arrival of renewable diesel, U.S. consumption is on track to increase to 10% by volume as soon as 2022 as new renewable diesel capacity comes online.
It was recently announced that up to $100 million in competitive grants are being made available for activities designed to expand renewable fuels sales. Transportation fueling and fuel distribution facilities are eligible for the cost-share grants offered through the Commodity Credit Corporation (CCC) and the Rural Business-Cooperative Service (RBCS), a Rural Development agency of the United States Department of Agriculture (USDA).
The grants will fund up to 50% of total eligible project costs (to not exceed $5 million) to help facilities cover the expenses of converting to higher blend friendly status for biodiesel (greater than 5% biodiesel) and ethanol (greater than 10% ethanol). Eligible expenses include installation, retrofitting or otherwise upgrading of dispenser/pumps, related equipment and infrastructure.
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