Some years ago, I was asked to give a speech to a Latin American country’s customs authority with respect to fuel marking. To prepare for my presentation, I spoke to several suppliers and did some research with respect to alternatives and positive results around the world.
Following this research, to my chagrin, I noted that my initial ‘knowledge’ of fuel marking was quite limited and that there was much more to it than coloured molecules floating around in gasoline (which is how I had understood it at the time). In fact, I found fuel marking to be a secretive technology that was somewhat difficult to explain, akin to what James Bond had needed Q for to understand the science behind all those gadgets.
If my previous lack of knowledge was such, as a tax stamp advocate, then there was a very good chance that many of this newsletter’s readers might appreciate a ‘refresher’ on what fuel marking is and what it is able to do.
Firstly, let’s define fuel marking as the introduction of a unique molecule (the marker) into petroleum products, in the form of small traceable quantities, prior to the products being distributed to the market. The marker helps revenue or customs authorities discern between what is legal (marked) and what is not (unmarked).
The unique chemical marker is not generally visible to the naked eye and can be precisely detected and measured using dedicated analytical instruments. It cannot be altered or eliminated, it works for all types of hydrocarbons, and it should not alter normal fuel characteristics.
Good markers are thermically stable and chemically inert, meaning that they will not react chemically to anything that will change their composition and thus interfere with their readability or performance as indicators of adulteration.
As with tax stamps, the fuel marker in a petroleum product helps to identify and guarantee the origin, duty-paid status, as well as the integrity or quality of a certain type of fuel. As such, it protects consumers and providers against adulterated or illicit products, and governments against tax fraud and subsequent revenue loss. Moreover, it can also be a tool for oil marketing companies to secure the integrity of their distribution networks and protect their brands.
Crude oil, the mother of all types of fuel products, is made up of a variety of hydrocarbons that one could say are ‘cooked’ in a complex heating and distillation process to further separate into sellable consumer products. Resulting products are propane, butane, petrol (gasoline), kerosene, diesel and other oils and vapours.
With respect to the traceability of fuel marking as a chemical tax stamp, we will focus on petrol/gasoline, kerosene, and diesel. These fuels, especially those intended as road fuels, are toxic both to the environment and to humans, and tend to be highly taxed and the most expensive. As such, they are the fuels usually targeted by criminals.
Probably the biggest driver for tax authorities worldwide to attempt to control the sale and distribution of adulterated or stolen petroleum products is tax fraud. And as with all kinds of products subject to fiscal, customs, and quality regulations, the economic impact of not controlling fuel products appropriately is what has driven many governments to evaluate and implement fuel marking programmes. To understand the magnitude in dollar values, in mid-2023, tax revenues lost worldwide to fuel fraud were estimated to be near $130 billion. Yes, you read correctly.
But tax revenues are not the only concern for governments, as environmental and health issues for citizens – not to mention increased criminal activity financed by stolen fuel incomes – are also drivers for implementing intelligent fuel marking and traceability systems for many countries.
Although fraud occurs on many levels, the type of illicit activity varies from country to country. Some examples are:
A proper fuel marker must have the ability to be identified by the agency in charge of inspecting the fiscal compliance or quality of the fuel tested, preferably directly in the field to obtain an immediate forensic result that is court-admissible, or in a central laboratory. Indeed, it is better to be able to quickly identify the transgressing party on the spot, thereby avoiding the risk of field samples being manipulated during their transport to the central laboratory.
The chemical stamping of a particular fuel should be easily traceable from the fuel depot to retail petrol stations, where officials should be able to verify that the marking concentration in fuel products sold at the distribution terminal matches with that sold across the country.
Another benefit of quality fuel marking is the reduction of ‘laundered’ fuel. This refers to the adulteration of highly taxed fuels with other, cheaper fuels, sometimes known as grade swapping. Today, most fuel marking programmes will show alterations in levels of traceability, immediately identifying a change in the fuel.
Technology may allow for more than one unique marker, with each marker designed to flag a specific alteration or manipulation. For example, one marker may be used for the qualitative detection of its presence relatively quickly in the field, and a secondary marker may require a more complex sampling test in a laboratory setting. In the latter case, the markers would consist of different molecules that can be detected even at very low levels via gas chromatography/mass spectrometry, which uses vapourised samples to measure molecular weight.
Other technologies can also allow for forensic-level analysis directly in the field using mobile devices, without the need for sending the samples to a central laboratory, thereby avoiding the risk of field samples being manipulated. These technologies are based on one marker only, whose concentration can directly and rapidly be quantified on the spot, anywhere in the fuel supply chain (depots, gas stations, fuel trucks).
Given the many different providers and technologies that are currently available, as well as traceable markers that can be customised to specific fuel properties and detected with portable proprietary devices and varied laboratory tests, tax authorities must review alternatives carefully before embarking on a potentially fruitful fuel traceability system.
