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Fuel prices

Discussion in 'General Industry Questions' started by Multiracer, Dec 4, 2014.

  1. Multiracer

    Multiracer Senior Member

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    I read this morning of $1.99 E-10 gasoline in Oklahoma. The gasoline prices have been tumbling for almost a year now.
    Has anyone seen diesel prices following this trend ? Around here it still hovers near $3.75 to $4.00 for on road for the last calendar year.
    Diesel is an early byproduct of the gasoline refining process... is it not ?
    I also wonder why the airlines, the railroads, the mines, and all of us diesel consumers are not making more noise about the huge gap in price.
    Your thoughts.:Banghead:Banghead
     
  2. Mobiltech

    Mobiltech Senior Member

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    WHY DIESEL COSTS MORE THAN GASOLINE

    Diesel fuel had traditionally been less expensive than gasoline, since it was easier to refine from crude oil. However, beginning in 2004, retail diesel fuel prices have consistently been higher than retail gasoline prices. There are several reasons why.

    Seasonality is one factor that had always affected diesel fuel prices. Diesel fuel, also known as number 2 distillate, is essentially the same as home heating oil (the major difference is that diesel fuel contains less sulfur). In colder winters when home heating oil is in more demand, diesel prices typically climbed faster than those for gasoline.

    Also, beginning in September, gas demand declines, but diesel fuel demand increases as more diesel fuel is required for the machinery to harvest and transport crops.

    (There are some differences between the more common distillate fuels. Off-road diesel, intended for farm machinery and other non-transportation purposes, is dyed red to distinguish it from on-road diesel, which has both state and federal transportation taxes. Home heating oil is very similar to both diesel fuels but contains more particulates, which would damage a sensitive diesel engine if used in a vehicle.)

    While seasonality has long played a role in demand, the more recent change in market dynamics, where diesel fuel is consistently more than gasoline, is a function of several broad factors.

    Strong Diesel Fuel Demand in Other Countries
    The United States is a gasoline-dominant motor fuels market. Approximately 98% of passenger vehicles in the United States are powered by gasoline, with fewer than 2% powered by diesel fuel. Consequently, the refining infrastructure is designed for optimum efficiency in producing gasoline. From a typical 42-gallon barrel of oil, the refining process delivers around 18 to 21 gallons of gasoline and 10 to 12 gallons of distillate, plus some other refined products. Refinery yields can somewhat be tweaked, but to produce significantly more distillate, they would need to undergo significant upgrades costing billions of dollars.

    While the U.S. remains predominantly reliant on gasoline, other countries throughout the world are more heavily reliant on diesel fuel. Diesel fuel is used in the majority of new passenger vehicles in Europe. Strong international demand for diesel fuel €" for both passenger vehicles and for industrial machinery in the rapidly growing developing countries like China and India €" has placed a premium on diesel fuel imports.

    U.S. Diesel Demand Increasing While Gasoline Demand Decreases
    While U.S. gasoline demand has decreased since peaking in 2007, demand for diesel fuel has remained strong. Diesel fuel powers most of the country's buses, trucks, trains and farm equipment. It also powers an increasing number of passenger vehicles. U.S. clean diesel vehicle sales increased 25.6% in 2012, almost double the overall auto market's increase.

    More diesel-powered vehicles mean more demand for diesel fuel. Comparing October 2010 demand to that of October 2012, demand for gasoline has decreased 3.4% while demand for on-road diesel fuel has increased 11.8%.

    Introduction of Ultra Low Sulfur Diesel (ULSD)
    ULSD is a clean-burning diesel fuel that is defined by the Environmental Protection Agency to have a maximum sulfur content of 15 parts per million (ppm). It was gradually phased into the market between 2006 and 2010, replacing the on-highway diesel fuel, known as Low Sulfur Diesel (LSD), which can have as much as 500 ppm sulfur content. In 2010, on-highway diesel fuel was 100 percent ULSD. ULSD is required for use in model year 2007 and later vehicles, which are equipped with advanced emissions control systems.

    There are enormous environmental benefits to ULSD, but there are also logistical challenges. Special care was required when transporting both types of diesel fuel during the transition. This included pipelines, bulk terminals and tankers. A batch of ULSD that has even slight contamination with LSD could lead to significant fines if the batch of ULSD exceeded a certain level. In addition, to produce ULSD the refining industry had to invest approximately $8 billion in infrastructure upgrades and the daily production costs for ULSD are higher than LSD, since the fuel requires more refining. This influences the cost of all diesel and results in a premium for ULSD, which is estimated to add about 10 cents per gallon to the cost of diesel fuel.

    Taxes
    The final factor in why diesel fuel prices are higher is taxes. The federal tax on diesel fuel is 6 cents more than gasoline per gallon (24.4 cents vs. 18.4 cents). The last increase in the federal tax was in the early 1990s, back when diesel fuel was usually less expensive than gasoline. Taxes do not factor into why diesel fuel prices are higher than gasoline today €" strong demand and USLD are the causes €" but taxes are a factor in overall prices.
     
  3. Multiracer

    Multiracer Senior Member

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    Great explanation of the cost involved in manufacturing and moving this fuel.
    Is there a time in the future ( read EPA ) when the world will rely on one type of ULSD and do away with all the associated costs you mention ?
    Let the demand only dictate the prices ?
     
  4. old-iron-habit

    old-iron-habit Senior Member

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    Does anyone think that the multi billion dollar quarterly profits posted by the oil companies have any factor on diesel prices? Most diesel burners do not have an option to stay home so rape is inevitable.



    Edit question, Here #2 on road fuel is $3.84 while 60/40 on road blend with #1 for our winter mix is $4.34. Premium diesel is $4.64. Why is #1 so much higher and whats the premium all about.
     
    Last edited: Dec 4, 2014
  5. Buckethead

    Buckethead Senior Member

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    It's good for us, less money to drive to work. :drinkup But I think it may be bad for the economy, because the oil sands and oil drilling have been providing jobs for a lot of people. I worry about how the lower prices will affect that. :confused:
     
  6. CM1995

    CM1995 Administrator

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    My sidewalk economics take on this is it's a double edged sword. It will hurt the smaller drilling companies and the ones in the oil industry that aren't well capitalized and that will result in job loss. However the money saved by consumers and businesses with cheaper fuel will benefit the entire economy.
     
  7. tmc_31

    tmc_31 Senior Member

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    OIH, I think you hit the nail on the head! The people who use diesel, for the most part, are a captive audience. They need diesel to make a living. When the price of gasoline starts getting out of hand, people can drive less, take public transportation and forgo that vacation. When the price of diesel goes up most of us who use it in our businesses just have to suck it up.

    Mobiltech, Thank you for the great explanation of why diesel costs more than gasoline. However, I must take issue with your statement that 98% of passenger cars use gasoline while 2% use diesel. While this may be true, it is a little off point. If you factor in all of the diesel using equipment in daily use (trucks, farm equipment, heavy equipment, planes, trains. buses, and yes a few passenger cars) not to mention distillate fired power plants, my guess is that diesel use is a much larger percentage of the total fuel use in the US.

    Tim
     
  8. Stump Knocker

    Stump Knocker Well-Known Member

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    Can you remember when gas was 24.9 and diesel was .08. ;-)

    STUMP KNOCKER
     
  9. Multiracer

    Multiracer Senior Member

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    Part of my first post was wondering when diesel eclipsed the price of gasoline and why.
    And yes I remember way back when it was at least .40 cents and gas was near .75 cents.
     
  10. Nige

    Nige Senior Member

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    Think yourselves lucky, today's headline was that gas in UK had gone below $7/US gallon for the first time for almost 5 years.......
     
  11. Multiracer

    Multiracer Senior Member

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    Does the UK import every last drop ?
    Heavy taxes ?
     
  12. clintm

    clintm Senior Member

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    Drop diesel to $2.00 a gal and raise gas to make up the difference even it has to be $6.00-$8.00 the economy would be in a hole lot better shape . people don't realize how much the price of diesel affects every thing and anything that they can buy unless mother nature put it there
     
  13. Buckethead

    Buckethead Senior Member

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    I think they have oil rigs in the North Sea.
     
  14. CM1995

    CM1995 Administrator

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  15. Nige

    Nige Senior Member

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    Good info. Maybe now it's easier to understand why nobody outside the Continental US has much sympathy when you guys start commenting about "high" fuel prices .............. it also explains why smaller more fuel-efficient vehicles (esp. diesels) are the norm in Europe. My personal ride is a 2-litre turbodiesel that does between 50 & 60mpg, but then again I pay the equivalent of about $7.50 a gallon for ULSD, at that price I need to make every gallon go further.
     
  16. 245dlc

    245dlc Senior Member

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    It would be nice if the U.S. and Canadian governments would just shut the door on middle east oil altogether to keep our markets from being lowballed by OPEC. I wouldn't mind the higher prices knowing that the gas and diesel I'm burning is supporting our economy and keeping people here employed.
     
  17. CM1995

    CM1995 Administrator

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    Nige the US market is finally getting some diesel options other than 3/4 ton and above pickups. My wife is beginning to look for a new (new to us :D) SUV and we are looking at the diesel options from BMW and Mercedes.

    245, the reason why OPEC is lowballing oil prices at the moment is the influx of oil being extracted from the US and Canada. More domestic production is pushing the price of a barrel down. OPEC is doing this because the drilling costs in the US are higher than most OPEC producers and they want to push the price down to make US oil less competitive.

    Due to federal law, the US basically cannot export any oil. It goes back to the '70's.
    http://www.cfr.org/oil/case-allowing-us-crude-oil-exports/p31005

    It is however legal to export refined petroleum. The world oil market is an interesting animal.:cool:
     
  18. John C.

    John C. Senior Member

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    I first saw diesel go up in price when Dodge became successful using the Cummins B series diesel engine. Add the Ford diesel and prices went to whatever the market would bear. Then the industry could say there was a limited supply and jack the prices.
     
  19. danielpeng

    danielpeng New Member

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    I guess drop of gas price is the result of political wars.
     
  20. td25c

    td25c Senior Member

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    Agree danielpeng. Has nothing to do with supply & demand . One business or entity is trying to put the hurt on another and run them out . Don't get used to the low price as it wont last long .