The supply of US highway diesel fuel will not be disrupted in 2006 as a result of a regulation that tightens up sulphur content, according to a study released by the Alliance of Automobile Manufacturers and the Engine Manufacturers Association. There have been fears that the oil refining industry will have trouble meeting the new limit and that fuel shortages could result.

A recently adopted regulation will cap sulphur content in highway diesel fuel at 15 parts per million (ppm) in 2006, when the fuel must meet ultra low sulfur diesel (ULSD) standards required by the US Environmental Protection Agency (EPA) as part of its emissions reduction programs.

The study, conducted by MathPro Inc., examined US regional markets for refined products and concluded that refineries are likely to find the economic driving forces for investment in ULSD capacity to be substantial, and alternatives to ULSD to be unattractive. Importantly, the study concluded that domestic and offshore market forces would make widespread abandonment of the highway diesel fuel market unattractive to refiners. An analysis of economies of scale suggested that refineries -- especially small refineries-- with high cost ULSD production could reduce their costs significantly by participating in joint production arrangements.

"We are extremely pleased with the outcome of this in-depth study," said Josephine S. Cooper, President and CEO of the Alliance of Automobile Manufacturers. "It carefully examined key technical, economic and market factors shaping U.S. refinery investment decisions and concluded that ULSD, which will be required by clean diesel vehicles, likely will be fully available across the U.S. in 2006 for consumers interested in this fuel- efficient technology."

Jed Mandel, General Counsel to the Engine Manufacturers Association, indicated that "the availability of 15 ppm diesel fuel in 2006 is essential as heavy-duty engine manufacturers introduce advanced aftertreatment technologies to meet new federal emissions regulations. Our industry strongly supports the Environmental Protection Agency fuel initiative, and the MathPro study demonstrates that the fuel should be in the marketplace when new engine technologies are commercially introduced."