Issue #152 | June 27, 2008 | by Erik Wood, SB Roving Editor

With gas prices skyrocketing above $4 per gallon and analysts yesterday predicting $200 barrels by 2010, the ripple effect is causing chaos around the globe. These new price points are the catalyst on everything from the cost of corn to national security.

Buried amidst the clamor is the sinister byproduct: fuel is more tempting a target for large scale theft than ever before. Imagine the temptation of a tanker truck driver in Ghana or Lithuania who can change his life, and feed his entire family for more than a year, by siphoning a load of fuel and reselling it. Just one tanker load.

Not only does the theft of refined fuel impact costs, concerns about reliable access to fuel can have a far larger impact. It has never been uncommon for commodity markets to spike on whispers of political instability. Can RFID provide a solution to this growing problem?

Stolen fuel could hit 10%
I had the opportunity not long ago to speak with sources at ExxonMobil regarding the problem of refined fuel “shrinkage”. Unlike barrels of oil, refined fuel is a high valued item, easily use or sold to others. At least 6% of Exxon’s total revenues are set aside to account for shrinkage in their supply chain.

They said six percent is an industry standard. If you consider that ExxonMobil alone took in a cool $347 billion in revenue last year, 6% of that is a pretty big number – and that is when the per-gallon price was $2. Set-asides for theft may grow to 10% this year, or more than $30 billion. That is a serious problem.

Here in the U.S., the theft of refined fuel is at an all time high. Major domestic fuel heists had been rare occurrences, once or twice a year. Reports I’ve seen indicate that they will be approaching weekly frequency soon.

The entire downstream fuel supply chain, from refinery to retail, is vulnerable to this “shrinkage.” Tanker trucks are the primary means of transport in this segment. No place is this truer than in Third World and emerging economic regions. In developed nations, too, theft occurs at the retail station or the tanker truck, by people siphoning gas from transport or storage tanks, whether through actual hijacking, driver theft or retail theft.

aRFID to the rescue
Enter what has become a well developed, emerging technology. By leveraging wireless active RFID (aRFID) communication devices with integrated sensors, the capabilities exist to prevent, or greatly reduce, the problem of refined fuel theft.

The key question had always been, of course, since this is a hazardous, liquid asset – where the heck do you put the RFID tag?

The answer is you monitor the hatch point of entry into the container, and the valve point of exit out of the container. Customized mechanical enclosures can be integrated with “Open/Close” monitoring aRFID tags. In conjunction with GPS locationing, you now have your in-transit monitoring platform.

The open/close monitor is an electromagnetic sensor on the metal post extending out of the sealed tag. Within the mechanical enclosure, the post finds its home, or set position, when it is in contact with a complementary magnetic piece. In the mechanical enclosure, the tag is held down to the base and the other end lifts away when a hatch or valve is opened. The active RFID provides the details of the shipment.

In conjunction with GPS data, you catch the culprits red-handed. You can set up "geo-fencing" in software to say, "Uh-oh, compartment 2 of truck 14 was just opened on highway 110 and not when it reached its intended GPS location.” Now you know what “alternate depot” the refined fuel has been offloaded to. Depending on the fuel cops’ capabilities, satellite pictures and other techniques can help when fuel is unloaded to mobile receivers; but certainly tanker drivers will not be able to feign ignorance and can face legal repercussions. “Crimes of opportunity” are eliminated from the equation.

Solution Challenges
Four years ago at Hi-G-Tek, we made our primary market focus the Fuel Transport segment. It offered us the perfect business criteria: a tremendous business problem to solve for which RFID was a natural fit for the solution. Who would have guessed how much more important this issue would become?

Some of the unique technical challenges that our team had to overcame included using aRFID in proximity to explosive gas; using Satellite packet data modems as a transmission element; and how to get the data coordinated with the existing truck fleet management systems.

Challenges were solved by creative solutions. Basically, how do you ensure that the tag emitting radio waves doesn’t ever spark? The solution was a sophisticated enclosure that met IP 66 ratings and eliminated the chance of igniting the fuel.

Cellular real time connectivity could not be relied upon and working with limitations of satellite modem packet data size was also a challenge. This meant restructuring the protocol to optimize the way longer messages including ID, time/date stamp, GPS lat/long, sensor headers and sensor values could be sent using short packet data streams.

Keeping up with, and integrating into, the expanding list of fleet management systems continues to be a customized task. A simple firmware interface is required to extract the GPS location Lat/Long data and open the communication channel of the cellular or Satellite modem link.

More value than preventing billions in theft
Besides the direct value of less theft from tankers and in-ground tanks, indirect benefits emerge. These include the reduction of trucks, trailers, and drivers required to carry the extra inventory. Since each tagged valve can carry the compartment load information (grade of fuel), when a tanker compartment is opened and a ground tank is opened, if they are not both Diesel an alarm can go off. This prevents costly grade mixing.

Erik Wood, RFID Switchboard Roving Editor, spends his days as VP of Business Development at Hi-G-Tek, a Rockville, Maryland based RFID company whose primary market focus is this application. www.higtek.com

*Attention SIs and VARs – Erik Wood tells you how to tap into this market segment – Here.

*For another view on RFID and fuel theft, check Jeff Schaengold’s blog on RFID Trade Mart.

I am in the GPS vehicle tracking industry (www.jett-track.com) as well and had no clue the shrinkage rate was so high. We are getting many comments from our customers on the use of GPS tracking and fuel savings. It's great to see that your team has developed a product that can identify when the fuel port is open. We've had customers in the fuel transportation business that caught employees stealing fuel and selling it to competitors.