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Diesel distress

By   /   Friday, June 6th, 2008  /   Comments Off on Diesel distress

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Diesel fuel, once a bargain compared to its refined cousin gasoline, has leapt to more than $5 a gallon in the Tri-Counties, rocking transportation-reliant companies.

Local business owners are feeling the pinch, whether they haul their products or pay someone else to do it.

For Baroda Farms, it means artichokes with no place to go.

“We end up throwing vegetables away,” said Steve Jordan, co-founder of the Lompoc Valley farm. When buyers can’t find affordable transportation to their markets around the United States, he’s stuck with surplus artichokes, broccoli and Brussels sprouts.

Everyone is looking for more local buyers, he said.

Jordan, who upped the farm’s artichoke production because more of them fit on a truck, is facing higher costs all around.

The price of fertilizer has tripled since a petroleum-based additive costs 10 times what it did a couple of years ago. “It’s changing how we use fertilizer and cuts into our profits,” he said.

Having already spent “decades trying to become more and more efficient” with farm machinery, “it’s harder to squeeze out that last ounce of fuel” to run the tractors, he said.

The owner of Santa Barbara Sand and Topsoil is also running low on new ideas for conservation. “There’s not too much more we can do,” said Vic Batastini.

His seven trucks feature electronic engines with the latest in particulate traps, and his drivers drive below the speed limit. They’re also combining loads to do more with fewer trips. “That’s huge in saving fuel,” Batastini said.

Jordano’s had the same idea.

The Santa Barbara company was “left scrambling” by the Memorial Day weekend fuel price spike, said Dave Henson, food and beverage service fleet manager.

“We’re cutting miles,” he said. “We’re trying to make sure our drivers use the most fuel-efficient routes.”

Diesel is very expensive, Batastini agreed – and Santa Barbara Sand uses 30 to 40 gallons a day. Still, it’s the best option for a big haul. “If you had this horsepower in a gas engine, it would burn about three times the fuel. It’s still more economical than gas,” he said.

Possible surcharge?

Higher fuel costs will eventually mean a surcharge at T&T Truck and Crane in Ventura, according to an employee who declined to give his name. He did say fuel is going for $5.18 in Ventura.

High diesel prices offer some unexpected benefits to Meathead Movers.

The Tri-Counties’ second-largest moving company is anticipating some new jobs from do-it-yourselfers who no longer a find financial incentive in renting a truck.

It has also lessened the cost barriers to biodiesel, which was once appreciably more expensive than the petroleum version. With little price disparity remaining and an 80/20 blend of biodiesel newly available just blocks from its San Luis Obispo headquarters, Meathead Movers converted all 12 of its trucks last month.

Biodiesel sought
“We’ve wanted biodiesel for a while,” said Aaron Steed, chief executive officer and president. “It’s ideal for us and the environment.”

Still, he’s budgeting for 30,000 gallons of fuel this year. Without raising rates or adding fuel surcharges, the company is finding other ways to cut costs.

“We need to figure a way to keep the lights on around here,” Steed said. “We need to do whatever we can do to be competitive.”

Diesel vehicles are hauling more than freight around the Tri-Counties.

More riders than ever are hopping on Chumash Casino Resort’s employee and guest shuttles, a free service offered since 2001.

“The cost of fuel is a realistic operational concern, and one that we have been monitoring since the first of the year,” said public relations director Frances Snyder, but “… even under the present economic conditions, we are devotedly committed to delivering a quality experience,” including the convenience of a ride.

Each week, 550 guests ride hourly shuttles from the Royal Scandinavian Inn in Solvang, 2,900 take advantage of the four-times-daily Goleta/Santa Barbara run, and 5,200 on six-times-daily shuttles from Santa Maria and Lompoc. The 19 shuttles, with capacity of 13 to 56 passengers, are doled out according to demand. Employees also get a free ride, with 5,300 passengers a week from Santa Maria and 4,200 catching the Lompoc shuttle, which also serves the Royal Scandinavian Inn and the Chumash Employee Resource Center in Buellton.

Ridership increases
Shuttle ridership is up by 18 percent. Carpooling is also on the rise; Snyder said the staff has noticed more riders than before in each valet- or self-parked vehicle.
Demand is growing for John Kelliher’s recreational shuttle service, the GrapeLine Wine Country Shuttle, “though not as much as last year,” he said.

The GrapeLine offers wine country tours in Temecula, Santa Barbara, San Luis Obispo and Paso Robles. The company has four diesel shuttles and seven gas vehicles, together consuming about $100,000 of fuel annually.

“Fuel prices were a major factor” behind a 10 percent price increase this spring, Kelliher said.
“It’s always hard to raise prices,” he added. “Especially in this economy, you feel like it’s pushing people away.”

Still, $98 for the “vineyard picnic” package – including transportation to tastings at four wineries, a winemaking tour and gourmet picnic lunch – isn’t bad for a mini-vacation, he said.

Diesel is topping $5 at California pumps, a price increase of more than $2 per gallon over the last year. That’s according to the U.S. Department of Energy, which put nationwide diesel price increases at $1.91. Yet gas averaged $4.09 here and $3.94 nationally by late May – up by roughly 70 cents in the last year.

Demand triples
The American Petroleum Institute, or API, cites several reasons why diesel is outpacing gas prices. The U.S. demand for diesel has grown at triple the rate of gasoline demand over the past five years. In Europe, more than 50 percent of new car sales are diesel, prompting a 15 percent increase in demand for diesel and a 22 percent decrease in gas consumption over the last decade, the API reports.

In the short term, expect more of the same: fall and winter traditionally stoke demand for heating oil and diesel for harvest activities, the API said.

Yet production is geared for gas. A barrel of crude oil yields about 19 gallons of gasoline, and half that volume of diesel and heating oil combined.

A New York Times article likened it to a lower demand for sirloin leading to less hamburger on the market – “while hamburger remained as popular as ever.”

Also, 70 percent of U.S. diesel production is ultra-low sulfur diesel: compliant to environmental standards but costlier to produce. The nation’s 350,000 independent truckers may be the hardest hit. The New York Times reported on May 27 that 45,000 trucks have been pulled from the highways since 2007. The last big shakeout, related to deregulation in the 1980s, saw 33,000 big rigs leave the roads.

Business owners are keeping their fingers crossed. “I think [prices] will come back down,” said Jordan, the artichoke farmer. “We have to get smarter on how we produce fuel and conserve it.”

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