Feds blame oil surge on supply and demand

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U.S. House of Representatives passed by a 387 to 37 vote legislation (H.R. 6532) to restore $8 billion to the highway trust fund that was taken from the fund in 1998. A sharp reduction in driving due to high gasoline prices is expected to create a shortfall in trust fund revenues by as much as $14 billion in the coming year.

Federal Highway Administration will allocate $11 million for intelligent transportation initiatives along I-95 and I-5 to help truckers find available parking efficiently. The Truck Parking Facilities program will involve the monitoring of parking availability and the transmission of that information to truckers, who potentially could reserve spaces in advance.

Federal Motor Carrier Safety Administration said a “strike force investigation” of moving companies resulted in 1,140 violations of federal consumer protection and safety regulations and nearly $325,000 in assessed fines. The effort targeted states receiving the most complaints in a consumer complaint database.

American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased on a month-to-month basis for the first time since January of this year, edging 0.5 percent higher in May. The May tonnage index of 114.8 was 3.3 percent higher compared with May 2007, marking the seventh consecutive year-over-year increase.

Freight Transportation Services Index rose 1.9 percent in May from its April level, the largest monthly increase since January, the Department of Transportation’s Bureau of Transportation Statistics reported.

In what federal agencies concede is a preliminary assessment, the Interagency Task Force on Commodity Markets (ITF) last month released a staff report concluding that fundamental supply and demand factors provide the best explanation for the recent escalation of crude oil prices. The Commodity Futures Trading Commission (CFTC) formed the task force in June to evaluate developments in commodity markets, particular investor practices and fundamental supply and demand factors.

The task force said its preliminary assessment is that current oil prices and the increase in oil prices between January 2003 and June 2008 are due largely to fundamental supply and demand factors. “During this same period, activity on the crude oil futures market – as measured by the number of contracts outstanding, trading activity, and the number of traders – has increased significantly,” the ITF report states. “While these increases broadly coincided with the run-up in crude oil prices, the Task Force’s preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices.”

Strong economic growth worldwide, especially in emerging market countries, has increased the demand for oil substantially in the last five years, while the production of oil “has responded sluggishly” and has been compounded by production shortfalls associated with political unrest in countries with large oil reserves, the ITF report states. “If a group of market participants has systematically driven prices, detailed daily position data should show that that group’s position changes preceded price changes,” the task force said.

The evidence available to date, however, “suggests that changes in futures market participation by speculators have not systematically preceded price changes,” the ITF said. “On the contrary, most speculative traders typically alter their positions following price changes, suggesting that they are responding to new information – just as one would expect in an efficiently operating market.”

The ITF – which is composed of staff members from CFTC; the departments of Agriculture, Energy and the Treasury; the Board of Governors of the Federal Reserve; the Federal Trade Commission; and the Securities and Exchange Commission – plans to continue its analysis and issue further findings later this year. For example, the task force’s interim report looked at the impact of commodity markets in general but not issues surrounding illegal manipulation of commodity prices. Data on the activities of commodity swap dealers and commodity index traders is expected to become available soon. The ITF’s Interim Report on Crude Oil is available at www.cftc.gov.

The task force’s preliminary findings that speculation isn’t a big problem in skyrocketing oil prices run counter to the conventional wisdom held by many observers. For example, the American Trucking Associations was among 19 business, consumer and union organizations related to transportation that called on Congress in June to enact immediate reforms to “the wildly-speculative energy commodity futures market.” (See “Oil speculation draws scrutiny,” July 2008.)

Tapping offshore reserves
In keeping with this emphasis on supply and demand, President Bush last month took further steps toward the strategy he announced in June to increase domestic oil production. On July 14, he lifted an executive ban on producing oil from the Outer Continental Shelf (OCS). The action essentially was political and symbolic, as Congress would have to lift its ban on drilling in the OCS. Bush again called on Congress to lift the ban, saying that increased access to offshore exploration is one of the most important steps to expand U.S. oil production. Estimates are that the OCS contains at least 18 billion barrels of oil and 76 trillion cubic feet of natural gas that can be recovered.

ATA President Bill Graves commended Bush’s action and called on Congress to follow suit. “We need the ability to explore new, untapped areas for domestic energy supplies,” Graves said. “The U.S. has an opportunity to improve our energy situation and continue to support economic growth, while providing consumers and businesses with the essential energy they need.”

Meanwhile, crude oil futures may have peaked in the near term. After hitting a high of more than $147 on July 11, prices fell by about 15 percent in the following two weeks. The U.S. retail average price of diesel hit a record of $4.764 for the week ended July 14, easing only 4.6 cents the following week.


Panel: Truck R&D needs stable funding, leadership
Federal research and development efforts to improve the fuel efficiency of commercial vehicles call for full-time executive leadership and a budgetary process that better focuses the resources of the various government departments and agencies involved. Those were the broad recommendations of a committee tasked with reviewing the 21st Century Truck Partnership (21CTP), an R&D partnership formed in 2000 by the federal government and more than a dozen industry partners, in a report released June 30.

Funded by four departments and agencies – the cabinet departments of Energy, Transportation and Defense, and the Environmental Protection Agency – the 21CTP’s mandate is finding ways to improve fuel efficiency, environmental performance and safety. The premise in creating the 21CTP was that very few U.S. truck manufacturers have the R&D resources to develop new technologies individually.

The committee reviewed 21CTP’s efforts in the areas of engines and fuels, heavy-duty hybrid vehicles, parasitic losses, engine idle reduction and safety. For a link to the committee’s report in PDF format, go to www.nap.edu/catalog/12258.html.


TSA offers voluntary hazmat guidelines
The Transportation Security Administration issued a series of security recommendations for the transportation of certain quantities of hazardous materials. The voluntary guidelines were developed over a three-year period by TSA’s Highway and Motor Carrier Division in consultation with government and private sector partners.

Acknowledging that no single solution fits all motor carriers and circumstances, the security action items call for implementation flexibility based on the assessed vulnerability of a particular process or operation. TSA said affected motor carriers and shippers should implement the security action items to the fullest extent practical, and the agency will use feedback from the voluntary program to consider regulations.

A list of the security recommendations is available at www.tsa.gov/highway. Direct questions and comments to the TSA Highway and Motor Carrier Division at highwaysecurity@dhs.gov.


DOE bid renews sleeper berth debate
Using an exemption request from the U.S. Department of Energy as an occasion to push for changes in how all drivers can use sleeper berths, the American Trucking Associations and the Truckload Carriers Association jointly urged the Federal Motor Carrier Safety Administration to allow drivers transporting transuranic waste to split sleeper berth time into two periods provided that neither of the two periods is less than 2 hours in length. Not surprisingly, the Advocates for Highway and Auto Safety opposes DOE’s requested relief.

In response to a court ruling striking down the hours-of-service rules that FMCSA adopted in 2003, the agency in 2005 severely restricted use of the sleeper berth to split mandatory rest. In June, FMCSA invited comments on DOE’s exemption application, which seeks special consideration for its contract drivers transporting transuranic waste. DOE wants the flexibility so it can expedite delivery of these shipments, which represent a high security risk. In its application, DOE proposed to adopt or continue a number of safety controls.

In addition to supporting the exemption, ATA and TCA told FMCSA they believe that “new and existing research on split sleeper berth use and driver performance establishes sufficient justification for FMCSA to undertake a new rulemaking to consider a more flexible sleeper berth provision for all solo and team drivers operating sleeper berth-equipped trucks.”

Greater flexibility for both solo and team drivers who use sleeper berths would improve safety by encouraging naps, promoting shorter continuous driving periods and advancing an approach to driving that’s more compatible with drivers’ circadian rhythms, ATA and TCA argued.

The Advocates believe the federal government must hold firm. “If FMCSA were to grant the exemption requested by DOE, the agency would in a single action undermine the fundamental rationale of its prior action justifying the present hours-of-service regulation in selecting the sleeper berth regime that insists on a minimum of eight consecutive hours of sleeper berth time to ensure that a driver gets a large, uninterrupted block of ‘anchor’ sleep,” the group declared.

For comments on DOE’s exemption petition as well as details on DOE’s safety controls contained in its application, search Docket No. FMCSA-2008-0076 at www.regulations.gov.


Correction
Xtra Lease provides trailer tracking free of charge to customers renting dry van trailers, but customers leasing trailers from Xtra Lease must pay for the service. CCJ incorrectly stated the availability of free tracking in “Leaders for trailers,” July 2008. Lease customers paying for trailer tracking get expanded features over the free rental product, including alerts, landmarking and the option to add door and cargo sensors.


CCJ Hotspots: New blood in the ranks
While Illinois made its fifth consecutive appearance as a CCJ Hotspot in June, Georgia joined the ranks for the first time this year, and California make its first appearance since January. In cooperation with freight-matching leader TransCore, we highlight the nation’s three hottest states – those where the outbound load-to-truck imbalance is most in favor of the carrier. We then pair these states with market rate data to identify the three best outbound paying lanes by each of the three most popular equipment types – van, reefer and flatbed. And like the three origin states, all of these destination states have positive load-to-truck ratios. Load-to-truck ratio and market rate data are courtesy of TransCore. The goal is to highlight not only the best states for spot-market freight but also the best outbound opportunities from those states.


Carrier News
Alvan Motor Freight, a family-owned regional less-than-truckload carrier, ceased operations in late June, citing troubles in the automotive industry, the extended strike at customer American Axle, escalation of fuel prices, overcapacity and the credit crunch. The Kalamazoo, Mich.-based carrier was founded in 1941 by the Van Zoeren family and employed 525 at the time it ceased operations.

Roadrunner Transportation Services Holdings Inc. announced last month that it had filed a registration statement with the Securities and Exchange Commission relating to a proposed initial public offering of its common stock. The Milwaukee-based company provides nonasset-based transportation services.

Jim Palmer Trucking and its two subsidiaries – Jim Palmer Equipment and Jim Palmer Equipment II -filed in U.S. Bankruptcy Court for Chapter 11 bankruptcy protection. The Missoula, Mont.-based trucking company plans to continue normal day-to-day operations as it reorganizes its finances.

RoadLink acquired Vancouver, Wash.-based international intermodal trucking company American Freight Systems. AFS joins Seattle-based West Coast Trucking and C-Truck, the Canadian trucking portion of Hapag-Lloyd, as RoadLink’s third acquisition in 2008.