November 23, 2011

No end in sight for fuel shortage

By Kate Ruggles
Farmer Staff Writer

Believe it or not, America’s biggest oil-producing oil patch has been experiencing a fuel shortage for the last four months.
“I haven’t seen it this bad since the ’70s,” states Mike Rud, president of the North Dakota Petroleum Marketers Association.
While the average consumer may not have been aware, partly because this is mainly a diesel fuel shortage, and partly because of efforts made by Rud and his constituents, Rud does believe that soon, everyone will notice that there is a problem.
According to Rud, the North Dakota Petroleum Marketers Association has been working overtime to absorb the brunt of this fuel shortage by issuing ‘hours of service’ waivers to drivers bringing in fuel.
“Right now, semis are sitting in lines for three to four hours and sometimes the entire day to wait for fuel. The ‘hours of service’ waiver gives fuel drivers additional time to bring in fuel,” states Rud.
According to former truck driver, Roger Maki, this is a huge help.
“It takes time to get to Billings or Mandan,” states Maki. “Without the waiver, a driver may only be able to bring in one or two loads of fuel. But, with the waiver, they can bring in an extra load of fuel, which really helps.”
And, with the weather becoming colder, both Maki and Rud state that marketers will be switching from the number two diesel to the number one.
“The number one diesel is a blended fuel and holds up better in cold weather,” Maki states. “But it’s not made in all refineries, so drivers will have to travel farther to bring it in.”
“Without the waiver, consumers will see a lot more bags on pumps,” states Rud.
Another reason marketers are running low on diesel fuel is because of the allocations they are given.
According to Rud, the allocations, which are set by the companies that control the fuel product, are often-times based on past history and don’t reflect what is going on in today’s market. Therefore, they aren’t meeting the current demand.
Rud states that this shortage has him extremely concerned because it has not only affected North Dakota and its surrounding states, but the outcry for more product seems to have fallen on tentative ears.
“We need more product. We are maxed out with what is coming in from the east, out of Minnesota,” states Rud. “We need to get more product sent in from the mid-continent refineries, in Kansas, or the Gulf Coast refineries, but they are hesitant to do so.”
According to Rud, their hesitancy comes from the volatility of the oil market in combination with how long it would take the product to get to North Dakota from one of these refineries.
“Once the mid-continent or Gulf Coast refineries put their product into the pipeline, it takes two to three weeks to reach us,” states Rud. “That means that with the market being so up and down, the producers may put the product into the pipeline at one price, but by the time it reaches us, it could be selling at a lower price.”
Even if the market wasn’t uncertain, producers simply haven’t seen the demand for fuel in North Dakota.
Rud states that until recently, the general public has had no idea North Dakota was experiencing a diesel fuel shortage.
“For the sake of the consumer, we have taken measures to curb this shortage, but we need people to make noise in order to get more product up here,” states Rud.
Rud states that the North Dakota Petroleum Marketers Association has been talking about discontinuing some of its efforts, so more people and businesses will make the producers aware of the demand for fuel.
“When you don’t let anyone run out of fuel, people don’t know there is anything wrong,” states Rud.
And, even though measures have been put in place to increase the North Dakota Marketers’ ability to receive more fuel, these efforts take time, and according to Rud, North Dakota needs fuel now.
“We have a plan in place to increase the size of the pipeline running from Billings to Glendive, and we’re updating the loading and unloading systems at rail stations, so marketers can receive more product by rail,” states Rud. “But the fact remains that if we don’t get a steady supply of product from a reliable source, we will have to start paying a premium for fuel.”
So how big is the demand for fuel in western North Dakota?
“We estimate that two to three million gallons of diesel fuel go into the whole oil patch on a daily basis,” states Rud. “And, it takes 3,000 gallons a day to simply power one rig. With 20 to 30 more rigs supposedly coming into the oil patch, the demand is huge.”
“It seems like there are at least twice the amount of trucks here than there were last year,” states Maki. “And, when you take into consideration that a number of drivers are living out of their trucks, and therefore leave them running all night, there is a lot of fuel being consumed right now.”
If the demand for fuel isn’t seen and met soon, North Dakota consumers could be seeing more long lines and rising fuel prices at the pumps.