How does Diesel Exhaust Fluid Differ from Diesel Fuel?
After being introduced to North America in 2009, Diesel Exhaust Fluid (DEF) is the second most consumed fluid today on a truck after diesel fuel.
It’s common for consumers to assume production,handling, delivery, and pricing of DEF is similar to diesel fuel. Although both products are consumed by diesel equipment, DEF and diesel fuel are significantly different products. They share few similarities when it comes to manufacturing, sales, transport, storage, and usage.
To better understand the differences between Diesel Exhaust Fluid (DEF) and diesel fuel, let’s discuss the product sourcing.
We’ll explore the similarities and differences of production, wholesale distribution, and terminal structure.
From the beginning stages of production, you can see DEF and Diesel have little in common:
Diesel fuel is derived from crude oil through a process called refining. Oil refineries are located throughout North America concentrated near the coast, inland waterways, and crude oil production sites.
Diesel Exhaust Fluid (DEF) is derived from urea where urea is further derived from natural gas or coal feed stocks through a chemical process.
The production and wholesale distribution of refined fuel products is a mature industry evolving over the last 100+ years and involves several integrated oil companies who operate approximately 95,000 miles of pipelines.
From the refining process diesel fuel passes through pipelines, bulk barges and/or railcars, ending up across the country in large bulk storage terminals. Lastly, the product is pumped into tanker trucks which make deliveries to gas stations, distributors, and remote locations.
DIESEL EXHAUST FLUID (DEF)
A typical urea producer sells DEF to a limited number of large customers. DEF distribution utilizes a two-tier distribution strategy which helps urea producers manage their capacity and improve working capital.
Tier 1 distributors and national travel centers are the largest DEF customers for urea producers. A Tier 1 distributor receives bulk product (via rail or tank truck) and operates bulk DEF terminal/blending facilities and packaging plants. Tier 1 markets DEF to Tier 2 distributors and high-volume end users (including regional fleets and travel centers) in full railcar loads, tanker truck loads, or packaged good truckload quantities.
Tier 2 distributors are essential in the distribution channel, servicing local markets and the ‘last mile’ of delivery to end customers utilizing smaller bulk storage facilities and warehousing of DEF packaged goods.
Bulk diesel fuel terminals receive product in its final form and are equipped with tanks capable of holding millions of gallons of finished, ready-to-use petroleum products. These terminals are typically filled directly from pipelines efficiently. There is excellent downstream availability, consistency, and a standardized pricing structure for diesel fuel throughout the market.
However, the cost and reliability of DEF is dependent on how the product arrives at the terminal which varies from location to location; this is a major differentiating factor between DEF and diesel fuel.
Delivery To Customer
Moving product from terminal tanks to the customer is the last step in the supply line. For both Diesel Exhaust Fluid (DEF) and diesel
fuel, this is typically accomplished through tank trucks – this the only similarity in regard to delivery to the customer.
Who Delivers Diesel Exhaust Fluid?
There are typically three types of DEF distributors:
- Third-party distributors
- Diesel fuel distributors
- General chemical distributors
Third-party distributors are commonly utilized to move DEF from the plant to the tank. Since DEF is a chemical, companies transporting bulk chemicals have also expanded into delivering DEF. Many large diesel suppliers do not participate in DEF delivery since it’s an entirely different business and requires significant capital. Due to this reason, a fuel transporter who would like to enter into the DEF market would need to invest in new equipment.
Higher Inital Equipment Costs
There are higher initial equipment costs for companies delivering Diesel Exhaust Fluid. Examples of costs include stainless steel trailers which cost more to manufacture, have lower product capacity than lightweight aluminum bulk fuel trailers, and require a longer lead time to be manufactured. A diesel fuel transporter who would like to enter into the DEF market would need to invest in new equipment requiring significant capital.
Comparing DEF and Diesel Fuel Delivery Factors
Since DEF is not diesel fuel, there are different delivery factors between the two products including:
- DIESEL EXHAUST FLUID (DEF) - DEF requires stainless steel for all equipment including tank trucks, since it's slightly corrosive.
- DIESEL FUEL - Aluminum tank trucks are suitable for diesel fuel.
- DIESEL EXHAUST FLUID (DEF) - Customers require a variety of solutions varying from 2.5 gallon jugs to 5,000 gallon bulk loads depending on the demand at each site. For this reason, DEF is delivered in pre-packaged quantities including 2.5 gallon jugs, 55 gallon drums, and 330 gallon totes AND is also available in bulk quantities.
- DIESEL FUEL - Diesel fuel is typically only sold and delivered in bulk quantities.
- DIESEL EXHAUST FLUID (DEF) - DEF product flow has logistical variability and is commonly converted into final product at the terminal. For this reason, consideration of lead time needs to be taken when estimating delivery to the customer.
- DIESEL FUEL - Product is pulled directly from the pipeline, so there isn't a heavy logistical variability compared to DEF.
- DIESEL EXHAUST FLUID - DEF is heavy in weight, which creates additional logistic costs.
- DIESEL FUEL - Diesel fuel is lighter compared to DEF around 2 pounds per gallon.
Pricing is one of the biggest differences between DEF and diesel fuel because they fluctuate independently from one another.
DOWNLOAD THE FULL Whitepaper
The "Diesel Exhaust Fluid, it's NOT Diesel Fuel" whitepaper clears up the common misconceptions comparing DEF and diesel fuel.
More importantly, we’ll outline the evolution of DEF including differences in product sourcing, delivery, and pricing in more detail.