The US Northeast will soon have to depend on trucks and boats for diesel shipments as pipelines shy away from carrying a new ultra low sulphur blend that is easy to contaminate.

As a result, the heavily populated region could be more vulnerable to diesel supply shortages and price spikes, analysts and refiners warned. That would be bad news for consumers who saw diesel prices hit a record only months ago.
“It’s going to throw a curve into the system and time will tell if ... trucks, barges or refiners in the area will be able to make up the shortfall,” said Charlie Drevna of the National Petrochemical & Refiners Association.
Retail diesel prices shot to an all-time high of $3.24 a gallon in late October on strong demand from truckers and supply disruptions after hurricanes hit the Gulf Coast.
Now the market is girding for new US regulations, aimed at improving air quality, that will require all diesel for use on the road to contain sulphur levels of 15 parts per million or less by October, down from the current 500 ppm limit.
Refiners are racing to upgrade plants to meet the looming fuel rules, to be introduced in June and fully implemented in time for on-road diesel vehicles starting with 2007 models.
Pipeline operators spent up to $500 million preparing for the new rule and conducting several test runs. But they still expect some glitches.
Once it leaves refineries, ultra low sulphur diesel will likely pick up sulphur left in pipelines from heating oil and jet fuel, experts said. These dirtier fuels flow in separate batches on the same line.