Are Low Diesel Prices Hurting Biofuels Companies?

March 21, 2016 by John O'Dell

With diesel fuel prices hovering at lows not seen in a decade, the smart money might bet against businesses developing products to replace the diesel engines and technology that keep the nation’s trucks on the road.

But entrepreneurs developing new fuels, engines and other green technology insist that they aren’t worried that retail diesel prices hovering near $2 a gallon, a drop of 30 percent in the last year, might hurt their ventures.

They are counting on a big assist from federal truck emissions rules that are about to be issued by the Environmental Protection Agency and the National Highway Traffic Safety Administration.

Headshot of Rebecca Boudreaux President of Oberon Fuels Inc.

Dr. Rebecca Boudreaux, President of Oberon Fuels Inc. (Photo: Oberon Fuels)

“Our major customers are long-range thinkers who understand that this price slump is temporary and who know that emissions regulations will just get tighter” over time, said Dr. Rebecca Boudreaux, president of Oberon Fuels Inc.

Her San Diego-based company is developing DME (dimethyl ether) fuel as a clean-burning, natural-gas- or bio-based renewable replacement for petroleum-derived diesel.

The final carbon-pollution-slashing regulations, due to be published this summer, are expected to call for medium- and heavy-duty pickups and vans to improve their emissions by as much as 16 percent from 2017 levels during the 2018-2027 model years. They will likely ask for a 16 percent reduction in carbon emissions from vocational trucks and a 25 percent reduction from heavy-duty trucks during the 2021-2027 model years.

Close up pipes oberon fuels san diego plant

The Oberon plant in San Diego, CA (Photo: Oberon Fuels)

Standards for trailers — mainly aerodynamic improvements to increase their contribution to fuel efficiency — would begin in 2018.

That new regulations are likely to be achieved through various combinations of improved emission systems, fuel efficiency and low-rolling-resistance tires.

Truck companies also will employ other helpful technologies such as electrically assisted idle-reduction systems (a form of hybridization), new low-carbon fuels and electric propulsion systems with no exhaust emissions.

Better aerodynamics for both tractors and trailers also will play a role.

Ignoring such technologies now to chase savings from continued use of cheap diesel could spell trouble in years to come as government emissions requirements grow ever more stringent. And as long experience demonstrates, the oil market stands just one international crisis away from an upward price jolt.

The green technology entrepreneurs know that they have another ace to play ­— regulation-driven demand for ever-cleaner trucks in California and other large states. Such state and local regulations go far beyond federal rules for reducing truck emissions and guarantee at least a limited marketplace.

The emissions-reduction incentives and rules in California’s low-carbon-fuel (LCF) regulations level the playing field for large biofuels producers by enabling them to sell at competitive rates, said Michael McAdams, president of the Washington, D.C.-based Advanced Biofuels Association.

California’s LCF standard requires the carbon content of fuels to be 10 percent lower by 2020 than in 2010. It established a market in carbon credits that can help low-carbon-fuel providers keep prices competitive.

Thirteen other states are developing LCF standards of their own.

That’s not to say it’s all smooth sailing.

Investment in alternative-fuel companies has dipped with diesel prices in the last year, said John Boesel, president of Pasadena, Calif.-based incubator CalStart, which works to advance clean transportation technologies.

“I’m concerned,” Boesel said. “I wouldn’t be if we were looking at $4.50 diesel.”

The economics to push investment in new fuels and to persuade fleet operators to look at expensive new technologies simply aren’t there with $2-a-gallon diesel, he said.

“People are anchored to oil, and this crazy market creates a lot of uncertainty,” said Jim Castelaz, chief executive of Motiv Power Systems Inc., a Foster City, Calif., electric powertrain developer for garbage trucks, buses and other commercial vehicles.

Fleet operators aren’t flocking to advanced fuels and engine technology, said Noël Perry, a trucking industry analyst at FTR Transportation Intelligence.

Perry isn’t optimistic about the future for alternative powertrains or fuels if the big push has to come from the EPA rules rather than high diesel prices.

“It certainly pays to reduce fuel consumption, but there already are operators getting 9 to 10 miles per gallon when the fleet average is around 6.5 mpg,” Perry said.

Most long-haul operators will reach the 25 percent cut in carbon emissions the new rules are expected to demand by implementing existing technologies.

“They won’t need any significant technology breakthrough,” Perry said.

Present efficiency-boosting technologies include improved diesel engines and filters, better aerodynamics and use of low-rolling-resistance tires, he said.

Proponents of advanced fuels and technology, however, insist that new approaches are needed because emissions rules will continue to toughen beyond what widely used existing technologies can handle.

So while the ability to save gobs of cash with low-cost diesel now does have some fleets reducing or even dropping their interest in diesel replacement, Castelaz said, “most fleet operators say that oil prices are a huge risk factor. As they look to the future, they want ways to reduce the risks.”

Though not practical for long-haul trucking, electric propulsion can make work truck and short-haul fleets less vulnerable to fuel price fluctuation. Electric drive systems also can reduce maintenance and repair costs and meet most anything the EPA can come up with in new tailpipe emissions rules, Castelaz said.

To sell their goods in the face of current diesel prices, Castelaz’s Motiv and other makers of alternative engines and fuels tell clients that future savings will offset the higher buy-in expense of their green technology.

There’s also an image benefit to some fleets, Castelaz said.

AmeriPride Linen & Uniform Services plans to add 10 Motiv battery-electric delivery trucks to its fleet. With more than 1,200 delivery trucks, the Minnetonka, Minn.-based company is one of the nation’s largest uniform and linen rental companies.

Motiv AmeriPride Fleet in Vernon

Motiv Ameripride electric fleet in Vernon, CA (Photo: Motiv)

It put its first electric truck into service in February in Southern California. AmeriPride intends to continue to “invest resources and to test and help advance new green technologies,” said Bill Evans, the company’s president and chief executive.

AmeriPride also has purchased delivery trucks with hybrid and alternative-fuel powertrains.

The Motiv all-electric powertrain was installed in a van-bodied Ford F-59 chassis. It has 80 miles of range per charge and can attain a 50 percent recharge in just 2.5 hours. Motiv said the modified trucks will reduce operating costs by 80 percent compared to a similarly sized and equipped diesel delivery van.

Achates Power of San Diego is developing another type of alternative powertrain: a two-stroke, compression-injection, opposed-cylinder engine that burns petroleum diesel as well as biofuels.

Achates Power's opposed-piston, two-stroke, compression-ignition engine.

Achates Power’s opposed-piston, two-stroke, compression-ignition engine. (Photo: Achates)

Diesel prices aren’t a big factor for Achates because the company’s marketing is centered more on emissions reductions and overall fuel-efficiency improvements at relatively low cost, said David Johnson, Achates’ president and chief executive.

The present climate, he said, sends mixed signals. Truck fleet operators know they’ll need to use more efficient engine designs in the future to meet regulations but are hesitant to start switching now because standard diesel fuel is so cheap.

Achates can compete, Johnson said, because its engine design eliminates the expense of the valve train and cylinder head. It will cost about the same as a standard diesel while promising substantial improvement in efficiency and emissions reductions, even with diesel fuel.

Achates has a dozen projects in testing now for customers that include the U.S. Army and diesel engine manufacturer Cummins Inc. It is looking at mass production “in five to 10 years,” Johnson said.

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Editor’s note: This article was prepared by but appeared first on as part of a content distribution agreement. 

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