Soaring fuel costs

| August 31, 2006

After fluctuating near $3 for weeks, the national average price of a gallon of diesel passed that mark for the week ending Aug. 7.

The price is likely to go higher in the wake of an announcement by BP that “unexpectedly severe corrosion” in its Alaska pipelines will force a partial shutdown of the Prudhoe Bay oilfield, the largest in the United States.

After BP announced its bad news, oil prices shot up to $77 a barrel, an ominous sign for pump prices.

According to the U.S. Department of Energy, the average gallon of diesel in the week ending Aug. 7, before the Prudhoe Bay problems became known, cost $3.055, an increase of 7.5 cents from the previous week and an increase of almost 65 cents from the same week a year before.

BP announced Aug. 10 that it is continuing production in the Western Operating Area, where approximately 120,000 barrels of oil are being produced per day.

The company has completed shutdown of the Eastern Operating Area, where data from a smart pig run revealed 16 anomalies in 12 locations in one of the oil transit lines on Aug. 4. Subsequent inspections found a small oil spill and revealed five additional holes in the line.

The Department of Transportation stated in an amendment to its Corrective Action Order that it is not aware of any data concerning the current condition of the pipe in the Western Operating Area that it believes would necessitate an immediate shutdown of operations on the line.

BP has focused increased inspections on the WOA, devoting more than 150 personnel to stripping, inspecting and providing 24-7 surveillance of the pipeline. A decision is expected to be made after press time on whether the WOA will be shut down as well.

Production from the eastern half of the Prudhoe Bay field will not resume until it is approved by the DOT. The company stated that it has purchased more than 3.5 million barrels of crude oil to meet BP’s West Coast refineries and marketing needs over the short term, and it expects no disruption of gasoline supplies for California or the West Coast during this time.
- Brittani Tingle

Onboard Recorder Proposal Goes to the White House
The Department of Transportation submitted for White House review on Aug. 10, a long-awaited regulatory document related to the use of onboard recorders (EOBRs) for hours-of-service compliance.

Although the precise scope of the proposal is not known, sources said that it is a comprehensive package of incentives and, possibly, proposed requirements that would encourage wider adoption of EOBRs.

“It’s not a one-size-fits-all proposition,” said one source who spoke on the condition of anonymity. What that means is unclear, however. For example, the proposal might approach fleets of different sizes differently. Or it might treat carriers differently depending on, for example, whether they haul hazardous materials or general freight.

The Federal Motor Carrier Safety Administration issued an advance notice of proposed rulemaking almost two years ago in response to a federal appeals court decision that criticized the agency for failing to consider seriously mandating EOBRs. In April, FMCSA said in an update of its regulatory agenda that it planned to issue a notice of proposed rulemaking by June of this year.

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