The price of diesel fuel just keeps rising. As I write this, I've seen the ninth increase in the past 10 weeks. The week's average price was $3.07, which is 87.7 cents higher (36 percent) than last year at this time! The cost of a barrel of oil was $84.20.
Do you think the cost of diesel is going to come down any time soon and stay there for a while? Not a chance. The people in the know projected that the price would go up another 10-15 cents a gallon, peak around Memorial Day, level off, then climb again as the price of oil heads to $100 a barrel by year-end.
What are fleets doing about this? Once again they are running scared. Last year, with the economy in the dumper, they had a terrifically scary year just trying to stay in business. Now that we are starting to come out of the recession, there goes the price of fuel again and the “Ghost of Past High Fuel Prices” is making nightly visits to fleet managers.
During the day, fleet managers are doing everything they can to maximize fuel economy. Some of the things they are looking at include using nitrogen instead of air to inflate tires; installing trailer skirts; wheel covers made of fabric on tractors; and tire pressure monitoring and maintenance systems.
You will note that all of these systems impact the maintenance and service of tire and wheel assemblies. The times they are a-changin' and you and your business/service practices will be affected.
Other things fleets are considering adopting are technologies recommended by the Environmental Protection Agency's (EPA) SmartWay Program, which motivates fleets to become more environmentally friendly by improving their fuel economy and thereby reducing their greenhouse gas emissions.
The SmartWay Program has been around since 2004 and has experienced modest growth over the last six years. It started out slow with the Big Three tire manufacturers having two or three of their standard low rolling-resistance and wide-base tires verified as saving at least 3 percent or more in fuel consumption relative to their best selling new tires for line- haul tractors when used on all three axles.
However, SmartWay has gained quite a bit of momentum in the last two years as fuel prices skyrocketed. As of late June, nine tire companies had 88 tires in 13 brands with SmartWay certification.
While the SmartWay Program is relatively new, fuel-efficient tires have been around for a long time.
When they were first introduced in the early 1980s, they were much more expensive than standard over-the-road tires. While they saved a fleet 3 to 4 percent in fuel when compared with “standard” tires, their tread life was about 30-percent less. When diesel fuel was under $2 a gallon, there wasn't that much advantage to equipping a fleet with these tires since what truck operators saved in fuel they spent on additional rubber. So sales of fuel-efficient tires and retreads were sparse.
But the world turns and so does the tire industry. In 2008 diesel fuel soared to $4.74 a gallon in July. This exploded the demand for fuel-efficient tires whose sales increased 20 percent in 2009 even though total truck tire sales dropped 10 percent due to weak freight levels.
Fuel-efficient tires have changed, too. Instead of having a big difference in tread life, the tread mileage of the latest-generation fuel-efficient tires is only perhaps 2 percent less than standard tires with similar tread depths and they cost only about 5 percent more. When these tires are used on all axles of a vehicle, a fleet can expect to see a 2- to 5-percent improvement in fuel economy. Today it is estimated that sales of standard low rolling-resistance truck tires make up approximately 30 percent of the market.
Starting this year, though, things began to get really interesting. Beginning Jan. 1, California's Air Resources Board (CARB) began requiring that any 2011 model year straight truck or tractor that pulls a 53-foot box-type trailer and drives in or through the state must use SmartWay-verified low rolling-resistance tires and other SmartWay-approved aerodynamic devices. If the trailers are 2011 models, they also must be equipped with SmartWay-certified fuel-efficient tires. Since many OEMs began selling 2011 models in early 2010, this affects many vehicles right now. But it gets better.
Beginning Jan. 1, 2012, the regulation also establishes deadlines for retrofitting 2010 and older model year tractors, straight trucks, van bodies and box-type trailers with low rolling-resistance tires as well. Fleets with 2010 model year and older tractors will have until Jan. 1, 2012, to replace all of the tires on their tractors with fuel-efficient tires and 2010 model year and older box-type trailers will have until Jan. 1, 2013, to have their tires replaced with SmartWay-approved tires.
Fleets with 2003-2008 model year refrigerated van trailers will have several more years to replace the tires on those trailers.
Large fleets also can phase in compliance for older trailers, with 5 percent of the fleet in compliance by Jan. 1, 2011. This accelerates the need to retrofit somewhat but doesn't hit the whole fleet at one time as 100-percent compliance is not required until 2015.
However, their compliance plans had to be submitted to CARB by July 1. Small fleets with up to 20 trailers have until July 1, 2012, to submit their plans.
Fleets that do not conform to this requirement will be putting their customers in jeopardy as CARB can hold California-based shippers and brokers equally responsible for contracting owner operators and motor carriers that don't meet these requirements. The bottom line is that fleets that do not adopt SmartWay-verified technologies to meet CARB requirements will lose their California-based customers.
Expect sales spike
Now what do you think this is going to do to the sales of fuel-efficient tires? Well, if your business is located in any state other than California, ask yourself, “How many over-the-road fleets do I have that operate there?”
Unless they can have dedicated vehicles that run into California, their entire fleets are going to have to make the change to low rolling-resistance tires. Those of you who have your operations and customers in California, the same applies to almost all of your over-the-road commercial accounts. How many tires do those fleets buy from you?
Convert that number to fuel-efficient tires and you have now figured out what your sales of these tires are going to be. Keep in mind that some fleets may opt for wide-base tires instead of standard fuel-efficient tires.
Of course, there is a phase-in period, but as tires installed on vehicles wear out, they should be replaced with low rolling-resistance tires beginning now—at least on new model vehicles. It makes no sense for these fleets to continue to buy standard tires if they are going to have to remove them in a short time anyway. If they can get the benefit of better fuel economy now, it also makes good business sense to do this as soon as possible.
Is it any wonder why every truck tire manufacturer, including those in China, wants to get on the SmartWay-approved tire list?
At this time the SmartWay Program has not verified retreads but is working on a way to test them to ensure that they offer at least a 3-percent improvement in fuel efficiency over the “industry norm.” There's no fixed timetable for this to occur, but when it happens, odds are that they also will require the retreads to be placed on low rolling-resistance casings to get the optimum savings in fuel.
The CARB regulation does not specifically address retreaded tires, but according to CARB, as long as the casings are SmartWay-verified, retreads will be considered compliant. And as soon as SmartWay specifications are developed for retreads, the CARB regulation will be updated to include them.
By purchasing fuel-efficient tires now, fleets will begin generating the casings they will need for future SmartWay-verified retreads, maximum fuel savings and emissions reductions. And that is what's happening.
Already many fleet accounts are demanding only SmartWay tires. Have you seen this from any of your commercial fleet accounts?
This new CARB program is the impetus that will force a large majority of fleets to adopt SmartWay technology faster than they would have if left to their own equipment specification decision-making. It also is going to double the sale of fuel-efficient standard tires to probably 60 to 70 percent of the market in the next several years.
You may be thinking that all of this is far fetched and California's impact will be restricted to the West Coast. Well, guess again. Under a provision of the 1967 Clean Air Act, California was granted a waiver to set and enforce its own vehicle emissions standards. It is the only state that can enact more stringent air quality regulations than those set by the EPA.
Under other clean air provisions, though, once California has placed its air quality mandates in place, the rest of the states are free to adopt the same regulations, and there are numerous states that have non-attainment areas for greenhouse gases that run the risk of losing federal highway funding for being out of compliance on air quality. These states are highly motivated to follow California's lead.
Your challenge is to help fleets select the right fuel-efficient tires for their operations, have them in stock when they need them and assist them in their tire change-over programs. Perhaps some of your fleet accounts will want to involve you in their phase-in schedule planning.
It will be the tire manufacturers' challenge to produce enough of these tires to prevent shortages and back-order situations as demand for them increases sharply. Their bigger challenge is to continue to develop even more fuel-efficient tires since the SmartWay test measures prospective SmartWay tire candidates against the “best selling” new tires—which makes this a sliding scale.
As low rolling-resistance tires become more accepted, the baseline is going to change and become more fuel efficient. Eventually new SmartWay-verified tires will have to be 3-percent better than the current batch of SmartWay-approved low rolling-resistance tires.
The winds of change are certainly blowing in the commercial truck tire industry. Stirred up by increased global demand for petroleum, it's resulting in higher price, fears of global warming and the need to improve our environment. It's always hard to recognize which way the wind is blowing when you are in the eye of the cyclone, but this gale should be of benefit to everyone when the dust settles.
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