Diesel prices

[Doc Dave]

Does anyone really KNOW why diesel is so high? Back in the summer of '04, it was cheaper than regular gas. That made sense, it is less refined.
By last spring it was more than gas. Some local guy who pumped gas told me, "wait until schools out in June, when all those school buses are off the road, the price will drop down again". Well, it did not happen!
I like my diesel truck for many reasons, and am going to keep it. I just would like to know, is it supply and demand...driven by a misallocation of refinery capacity, or what?
BTW, in our county, gas was $2.19 a gallon today.

[JimmieD]

'Supply and Demand' is a thing of the distant past my friend. Today's economics are firmly rooted in a new philosophy across the board: 'What the Market Will Bear'. That is, what is the absolute highest price I can charge for the barest minimum of goods and services and not get lynched, burned down, blown up, tarred and feathered? In government the only limiting factor is incitement of mass anarchy and sedition or civil war. So far it seems to be working very well, for them.

Did you happen to stumble onto the post regarding gas prices/printer ink cartridges in this same forum, hmmmm....?

JimmieD

[cpstover]

Diesel fuel and home heating oil are very close to each other. I locked in my home heating oil @ 2.09 a gallon ( last year 1.59 and year before 1.09 ). Right now heating oil is around 2.29 and diesel in NH is around 2.65....(88.25 to put 33 +/- gallons in a fire truck).

Its not all supply vs demand....how high can we go before the consumer slows comsuption...Also which consumers can we hit cause theres nothing they can do but take it.....

[Charles Talbert]

OIL COMPANIES

They got it, you need it, they don't have any problem with ripping you off severely & sleeping tonight. Do you get the picture here? We live in a world driven by GREED.

[DDEMILLE]

What The Market Will Bear

I sell / used to sell industrial supplies. I called on tank farms owned by major oil companies. I noticed the same companies charged different prices in different cities. When I asked a terminal manager why, I was told, "(One city) will bear a higher price, always has". It truly is "whatever the market will bear". We really need to shop for the best price to get the competition back into fuels. We shop for fuel oil, propane, coal and electric prices. Propane can vary as much as $1 per gallon. Somebody is buying enough of this stuff to keep the company in business.
Doug

[dbemis]

fuel prices

China and India. Obviously, American Oil companies could drill, produce and refine oil and then sell it alot cheaper than they are and still make a decent profit. However, places like China and India (where so many jobs are exported to) are offering to buy the oil at higher prices so, voila! There it goes. It doesn't matter if we find and produce more in the future if we don't find a way to keep these other buyers from being happy to always pay more. The American consumer doesn't have as much clout as we think because we are not the only consumer. In places like China and India, their other costs of production (outside of fuel) are cheaper than ours (labor, real estate, taxes, etc) and so they can afford to pay more for the fuel. When those other costs go up then they will become less eager to keep bidding up the cost of oil. We need to make their workers want to buy ever more expensive comodities (preferably made in America) so that they will need to earn more etc. Also it is helpful if their governments increase their spending (and thus increase taxation.) We need to make it cheaper for us to use the oil and thus gain back some competitive edge. Taxing the huge profits made on selling the oil to non US buyers and using that to develope alternative energy sources would help reduce our demand and thus help control the cost. The question is, will any of this happen? I predict that the politicians well sell the idea that we need to produce more oil from within the US and go that route. But, what will happen is that that will only mean that the oil companies will have more to sell to China. I am not against producing more oil, I just don't believe that it is any way an answer either short or long term.
David

[Cheyenne Dave]

Don't forget the tax on diesel. You will find that the fuel itself is still cheaper than gas....


DAB

[MoparNorm]

Re: Diesel prices

Originally posted by Doc Dave
Does anyone really KNOW why diesel is so high?

I'm going to disagree with some of my dear friends here, the law of supply and demand was never more evident than with the current diesel prices.
Heating oil, ag fuel and diesel number two are basically the same fuel less the NOT for Hi-way use dye.
Right now, heating fuel production is taking a great deal away from the Diesel # 2 production for vehicles. Therefore less supply, at the moment. Hurricane Katrina disrupted at least 25% of domestic oil production creating potential shortages. Since most VOTERS drive gasoline powered vehicles, fuel production was shifted away from diesel towards gasoline for several months, therefore less supply. On the demand side, there are many consumers using diesel vehicles, but most power plants, over-the-road truckers, trains, ships and aircraft burn diesel or a derivitaive of diesel. The economy is booming, therefore demand is high and supply was low. The supply is starting to get back into balance now and in the last several weeks diesel has come down over 75 cents per gallon here in SoCal.
Lastly, industrial demand in India and China is at an all time high, crude production is up, and most of the worlds oil is no longer under our control, American refiners have to compete on the world market for their crude oil, if china is willing and able to pay more (think about that the next time you buy a chinese product) then that increases the cost as the bidding goes up.
There has not been a new refinery built in the US for over 30 years, permits, enviromental regulations and NIMBY resistance have prevented us from keeping pace with demand. There is plenty of oil available, but limited ability to refine it into the 75 plus regional formulas required by the EPA.
Conventional wisdom used to think that oil came from dinosauers and was limited in supply, but fields that were once "empty" are now being found to have replenished themselves, from seepage or "other" sources. Scientist are beginning to believe that oil may come, not from animal but from decomposing plants which may mean that the theory of diminishing supply is wrong. The worlds largest supply of oil, in the form of oil shale is under the western US and may yet have promise as research, which has been going on for 60 years, including an underground nuclear explosion near Rifle CO in the early 70's, continues.
In the short term, we need more exploration, drilling in Alaska and more refining capacity if we are to meet our energy needs now. In real dollars fuel is cheaper now than it was in 1960. It could be even cheaper with a steady safe supply of domestic oil, ample refining capacity, and the ability to safely and cleanly drill off of our coasts, where approximately 45% of our oil reserves are currently found.
Corporate Average Fuel Economy (CAFE) standards, alternate fuels, bio-fuels and nuclear power plants will all help in the near future, but you have to remember that it took 125 years to get oil and the automobile where it is today. It will take another 50 years to get technology and fueling systems in place to the point where hydrogen and other technologies will or can compete. Electrical powered vehicles were tried and failed in CA because the government cannot regulate lifestyle, the changes HAVE to be market driven, not mandated.
Most of what we think we know today is Junk Science from the media. "Global Warming" "Oil Shortage" "Irreversible Pollution" are all political concepts, NOT proven science.
Supply and demand always has and always will be the governing law of a free societys economic system. Any failures of the laws of economics are only because the government has disrupted the market by injecting regulations and controls into the mix that harm the consumer and slow down growth.
You must understand that there is NO SUCH THING as a "windfall profit tax" corporate tax or business tax. All that is, is code for higher prices, because EVERY TAX is already factored into a companies overhead and is passed down to us, the consumer.
The same goes for regulations intended to control methods and means, they ALL result in higher cost to the companies and therefore higher prices to the consumer. While we all agree that safety regulations and environmental controls are needed and desired, we must balance that need with an eye on cost. When politicians with an agenda start passing regulations with little or no knowledge of ecomomics you get the results we have today.
Funny that we heard little over the past few years of record oil company losses, but as soon as they make money we are all up in arms. Even though the amounts of oil company profits are huge, they represent less than a 10% profit for most of the companies, very small by today standards when companies and clothing distributors and distributors of junk chinese products routinely mark up their items by as much as 200%.
MN

[M5tankdriver]

The huge oil companies that dominate the price and availability of gas/diesel probably have more power than we can imagine. Car manufacturers can produce 50mpg autos (Volkswagon TDI) but they don't. The government can legislate higher MPG standards for autos, but they don't. There is an underground bunch of small manufacturers of bio-diesel (made from soybean oil) that isn't going mainstream. The list goes on. Big oil has a firm hold on our government. We will be metered just enough oil to keep profits high because this makes the most money. As an added bonus the gov. gets huge tax money from it. No conspiracy theory maniac here, just looking for that $1.99 gallon of diesel fuel.

[MoparNorm]

Any car manufacturer that can produce a high mileage car, will do so. No company keeps it's advantage on the shelf, that's just poor business, and it makes no sense whatsoever, you never give your competition a break. It is in the best interest of auto manufactuers to have a stable cheap supply of fuel, they are not allies of the oil companies, but neither one can operate independent of the other, no fuel, no car sales, no car sales no fuel sales.

The government can and does mandate fuel standards, that's the CAFE I was refering to. I also stated that the government cannot push technologies, only the market (that's you) can. If people wanted 51 mpg cars the car companies would build them, today people want SUV's and trucks that are practical, seen any Yugos lately?
Whatever the market demands, a company will provide. GM built electric cars, no one bought them.

Bio is NOT underground, ALL cars and trucks in CA run on B5 fuel, ALL Chrysler products are shipped from the factory with B5 in the tank, it's not underground, it is mainstream and growing Cummins will honor warrantees with bio up to B15, the change is coming, re-read my post above.

The one thing you have right is that the government makes huge profit on fuel sales, more per gallon than the oil companies make. 54 cents per gallon in CA. To think that fuel is rationed to make more money shows a basic lack of economic education. You make MORE money by selling more product, not by selling less, you make MORE money selling in volume, not by selling less.
Show some proof that big oil has ANY hold on the government, they are regulated to near death. It is reckless to state thoughts as facts without evidence and it doesn't help provide a solution to the problem.
Support refinery building, drilling offshore, drilling in Alaska and a free market and you will have your fuel at $1.50.
Our education system has seriously failed our country when the most capitalist country on earth cannot educate it's citizens about how the economy works. Education in the entire rest of the world teaches their students to emulate and copy the USA and learn our economic system, here we learn about half baked conspiracy theories and about some imaginary evil. The only evil is the failure of our system to educate our children. Basic economic theory dictates that if someone is charging too much for a product, someone else will come in and sell it for less. In this case misguided intervention by government regulation and taxes has created a false bottom to the laws of supply. Oil companies don't control the price of their product, government regulations and an informed, educated consumer dictate that. When you see three fuel stations on opposite street corners, do you look for the highest or lowest price? If you and others continue to shop at the low price station, the high price station must either lower it's price or close it's doors, it's really quite simple, no oil company imaginary evil scheme is forcing anyone to go to the higher priced station, just ignorant or lazy consumers who pull in by habit instead of looking at the price signs. If all three stations are too "high" go to the lowest priced station, the other two will be forced to lower their prices to compete, then you go there and the higher priced one will have to lower it's prices. It always worked this way, for some reason people have forgotten to look at the price signs or blindly shop by habit?
MN

[DDEMILLE]

Powerplant Fuel

I agree with everything Norm has said, with one exception.
Powerplants use oil as a last resort only. Although oil has more BTUs than other fuels is has it's own set of operating problems. Very few plants use #2 oil. Almost all oil burning plants use #6 oil (which is also lower on the distillation column), which has to be heated just to make it flow. Most large plants are coal fired. The next fuel of choice is natural gas. Many plants switched over ( very expensive) from coal to gas when the EPA came down on sulphur emissions and gas was relatively cheap. Now they're sorry. Some plants have the option of running more than one fuel type and coal (in states where it is available) is still their choice for economy. With all that said, most of the fossil fuel plants I'm familiar with are from the the midwest to the east. Southern California could be an exception.

Doug

[MoparNorm]

You're exactly right,

I didn't go into a great deal of detail on the powerplant fuel, just linking it to diesel type oils and the fact that I was over the 5,000 word limit...ha!ha!
SoCal uses natural gas, but only in an event of a stage three smog alert, it is too expensive otherwise. We have many steam boilers, fed by oil, but much of our power comes from Hydro-electric, we have that itty bitty little dam called Hoover on the Colorado River, and Nuclear, two local plants, and some wind/solar, about enough for 150,000 homes.
The United States has enough coal to last many years, we should be cleaning it up and using it. Just as coal has the sulfur problem, that is also one of the problems with the refineries, some are specific fo rrefining only sweet crude and some are only for sour (high sulfur) crude.
PS: who has the job to taste it in order to tell if it is sweet or sour? = )
Eventually there will be energy breakthroughs but in the meantime we have to use what we have.
MN

[M5tankdriver]

I am but an acorn to the mighty oak, MoparNorm. Clearly you are well educated sir but you take a bit too much from what I was saying... Most likely I was unclear:

The oil companies produce a certain amount of oil (see MN for exact amount) they sell every drop of refined oil. If they were to produce more than they sold in any given amount of time then the process would no longer be 100% efficient as it is now. As for ties to the government, well, let the VP and his 'secret' meetings with oil companies tell you about that. The recent showing of big oil at the senate hearing was not under oath... As it turns out that is a good thing because some of the participants would have perjured themselves by claiming to have not met with the VP. Let me clear the air out here though: I voted for this administration and will continue to support them. I am not bashing our leaders.

The car companies can build very high MPG cars and people do buy them, hybrids have a waiting list in Louisville!

I know the CAFE (I really did read your post) exists but I was trying to say that without raising the standards it does no good to have the standards. In the last big transportation bill they passed there were reports this number did not go up at all. (I didn't actually get to see the bill)

I am quite pleased to hear about the BIO fuel making inroads into the petro market. There is no biodiesel for sale in louisville that I am aware of.

[MoparNorm]

Originally posted by M5tankdriver

The oil companies produce a certain amount of oil (see MN for exact amount) they sell every drop of refined oil. If they were to produce more than they sold in any given amount of time then the process would no longer be 100% efficient as it is now...

...The car companies can build very high MPG cars and people do buy them, hybrids have a waiting list in Louisville!

If the oil companies produce more, then the supply increases and the price lowers, but the profit remains and as you say, they sell every drop, so whoever makes the most will sell the most and therefore increase their market share, the more they produce the more efficient they become, not less and the price will drop. Unused capacity is not 100% efficient. In economic theory, whoever makes the most, will sell the most at a lower price, it's the same principal that WalMart uses.
The same goes for the hybrids, they have a waiting list everywhere because supply cannot keep up with demand. The real issue is their performance over time and their ability to work in all conditions. They can't be used for hauling loads or towing, but there are a lot of customers out there who only need a commuter vehicle and these may be perfect for that. Either way it is for the market to decide, not the regulators.
MN

PS: Haliburton is a construction company not an oil company. Assuming that there was some twilight zone connection between the government and Haliburton (there isn't) we should be afraid of "Big Construction" not "Big Oil" = ). The Vice President met with oil companies to get their input for an energy plan, nothing sinister about that. If I was going to get a handle on energy needs and concerns, I'd talk to the source, not Green Peace.

[Cheyenne Dave]

Hey Norm...

You call this drivel? You are slipping, my friend! I feel like I gotta go back to school now....

Dave