Like mercury rising in an outdoor thermometer, past the levels of what folks call "comfortable," the rising cost of fuel for vehicles tends to make people irritable. Front pages run standard articles about the grumblers and the "I-remember-whens." Eventually prices go down, somewhat, and the news moves on.

Tucked into the business pages, however, are reminders that fuel costs are not borne solely by the family car. Airlines have per-ticket fuel surcharges of $20 to $87, while pizza restaurant chains have added a $1 fuel surcharge in most major markets. Other delivery/transport providers have followed in close suit.

Users of medical gases, on the other hand, involve people reliant on uninterrupted delivery of product. Medical insurance programs bear the cost of home delivery of oxygen systems, but with insurance companies already under attack for cost of their programs, the question becomes, how much will the companies and the consumers bear?

By the numbers
In August 2005, Forbes magazine quoted Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, as saying, "Every time the cost of diesel fuel goes up 10 cents per gallon at the pump, 10,000 truck companies in the US fold." With rising fuel costs, GWD recently asked Mr. Spencer for an updated of his statement.

"The '10' and '10,000' figures wouldn't necessarily be true today because many marginal or under capitalized small operators are no longer in business," remarks Spencer.

"The run-up in fuel prices in a slowing economy resulted in repossessions of some 250,000 big trucks from 2000 to 2002. While fuel prices are rising now and demand for trucking service is somewhat soft, we aren't likely to see a repeat of before because of tighter lending practices of financial institutions," he said. The earlier statement, adds Spencer, applies to long-haul truck transportation where fuel can consume 25 percent to 35 percent of total revenues.

An estimate of the tab for the trucking industry, including medium-and short-haul alongside the long-haul operators, runs to 650 million gallons of diesel fuel a week. Part of the most recent price hike is traceable to the Gulf of Mexico hurricanes disrupting refineries, oil wells and fuel shipments. When the refineries went back online, they concentrated on producing the product with the greatest demand, which was gasoline. On August 29, 2005, diesel averaged 2 cents per gallon less than regular gas, but by October 24, the cost of diesel was averaging more than 55 cents higher. According to the federal government's Energy Information Administration (EIA) statistics, diesel was creeping up on regular gasoline from about 1994 to the fall of 2004, when, for the most part, diesel became more expensive.

The EIA breaks down the cost of diesel this way—in October 2005, a gallon cost $3.10, of which 16 percent of the $3.10 went to taxes, 10 percent to distribution and marketing, 29 percent for refining and 45 percent for crude oil. Compare that to the breakdown on a gallon of regular gas from the same month, which cost $2.72—16 percent to taxes, 18 percent to distribution and marketing, 15 percent to refining, 51 percent to crude oil. While production has returned to pre-Katrina levels, the difference in price between diesel and gasoline remains about the same.

New diesel in the pipeline
An additional issue looming just around the corner is an ultra-low-sulfur diesel grade that will fuel the next generation of diesel engines coming on the market at the start of next year to meet 2007 emission standards. Lower-sulfur fuel is cleaner on its own, but the main purpose of ultra-low-sulfur diesel is to make it easier for engine manufacturers to filter pollution out of the exhaust after the fuel is burned.

The Environmental Protection Agency set a June date for refineries to begin producing the fuel, but some have already begun. Two grades of diesel fuel will be available until 2010, and there will likely be problems with misfueling vehicles for a while, unless delivery systems are differentiated at the outset. Refueling the new engines with fuel exceeding 15-ppm sulfur, as is presently offered at the pumps, could reduce fuel economy, damage soot-trapping filtration systems, invalidate certain warranty claims and result in increased emissions. Some industry insiders intimate that worse problems may happen to the engine and truck.

Manufacturing ultra-low-sulfur diesel will raise the price of diesel fuel even higher; an amount that concerned fleet managers are anticipating may be as much as 15 cents per gallon. If a bulk buyer, who purchases 7.5 million gallons of fuel per week for a fleet of more than 162,000 vehicles, has to pay 7 cents more a gallon to cover the price of ultra-low-sulfur diesel, the result would be $525,000 more a week for fuel. That's an extreme example, since most medical gas distribution fleets aren't nearly as large. However, an increase is on the way—and, too, this does not include the higher prices diesel truck buyers will be paying for 2007 emission-compliant trucks, starting next year.

Alternatives
Biodiesel fuel is one way to save at the fuel pump; however, there are not many biodiesel production companies and distributorships for delivery fleet-sufficient quantities. Some hybrid propulsion systems have been developed and tested in medium-and light-delivery vehicles, including diesel-electric FedEx trucks and some utility company service vehicles. Such systems even could be adapted to biodiesel fuel, further reducing costs, but development is limited—such trucks aren't coming to market anytime soon.

Another alternative is to change the type of vehicle used for delivery, to one with better fuel economy. Most people are familiar with stakebed trucks that are employed in delivering 60-in. tall gas cylinders, but an examination of Federal law (Code of Federal Regulations, Title 49 Transportation, §177.840 Class 2 (gases) materials), has no specification for vehicle type. Generally, compressed medical gases just need to be securely restrained in an upright position, loaded in racks, or packed in boxes or crates and securely attached to the motor vehicle to prevent the cylinders from being shifted, overturned or ejected from the vehicle under normal transportation conditions. The Department of Transportation refined the issue in 2005 by issuing guidelines for safe transport of medical oxygen on buses and trains, following a tragedy that occurred during a Hurricane Katrina-related evacuation.

Such flexibility opens the possibility of medical gas cylinder delivery with any vehicle sufficiently sized to the load, and having appropriate restraint systems. After May 30, 2003, the Code of Federal Regulations permitted cylinders containing a Class 2 material to be loaded in a horizontal position, but only when the cylinder is designed so that the inlet port to the relief channel of the pressure relief device is located in the vapor space of the cylinder.

Practical options
Using vehicles with better fuel efficiency for cylinder transport is just one way to cope with fuel cost. Small distribution businesses can also emulate the pizza chains (and other companies) by making fuel cost a separate line item. Such a strategy helps the consumer understand that a higher cost has an underlying cause. Better route management, aided by such software packages as ProMiles (www.promiles.com), will also contribute to lower operating costs.

And there's always the fourth option: absorbing the cost as a short-term measure. Since, no one, least of all small businesses, can survive on altruism in these times, the idea is not satisfying—however, the long-term cost of losing and having to replace customers may exceed the short-term cost of "biting the bullet" and absorbing price fluctuations.

The key term is "short-term" — such an option is contingent on the idea that current energy costs are just a spike. As the last several decades in the energy market have indicated, however, few can predict which way the wind will blow next.

Photo courtesy of H & H Sales Co. Inc. (www.hhsalescompany.com)