PowerSource

Advertisement

Power Topics: Blog filled with useful information about product applications, helpful hints, news, and advice for the busy design engineer.

Technical Editor Margery Conner's PowerSource streams the latest developments in electronic power design and related technologies.

Profile

About Me

RSS Feed

Add this blog to your RSS newsreader!

By Category

Power Management Articles

Blog

PowerSource

« 6:1 charging device: One charg... | Main | UV LEDs enable DIY pest contro... »

Wednesday, June 4, 2008

Why diesel is so expensive

Let’s take some time off from philosophizing about the future of extended range and electric vehicles and look at what may be electric and hybrid vehicle technology’s greatest competitor: Diesel.

My big fat diesel truck If you’ve been driving for ten years or more, you may remember when diesel was significantly cheaper than gasoline. However, about four years ago diesel moved up to and then passed gasoline in price. In California it’s running about $5.15/gal, compared to $4.24/gal for regular gas.

The Wall Street Journal says the rise in diesel is due to several contributing factors, but the main one is global demand.

“Growing demand in China, Europe, and the U.S. is putting pressure on already strained global refining capacity. The move in the U.S. to ultra-low sulfur diesel during the last two years has also led to increases in the cost of diesel production and distribution. The federal excise tax on diesel fuel is also six cents higher per gallon (24.4 cents per gallon) than the tax on gasoline. Global demand for other distillate fuels, such as No. 2 heating oil, has also been rising steadily.”

Another article in the WSJ about refinery output [Corrected] says,

“As diesel's price increase has outstripped that of gasoline, U.S. refiners have been easing the throttle on gasoline production, cutting refinery operating rates to 86.6% from 89.5% a year ago, according to the latest weekly government estimates.

Recently, weekly gasoline output dropped an average 2.2% from the same period last year, and it is below 2006 and 2005 levels. Meanwhile, weekly distillate production, which is mostly diesel, grew an average 3.2% from last year and surpassed levels from the previous two years.”

UPDATE: I had the wrong url for the second WSJ article (thanks, W17053, and sorry for the delay.) The article is behind a reg wall now, so let me summarize: The lousy US economy is causing US consumers to cut back on all fuel consumption, but the developing world, where diesel is often more popular than gasoline, is seeing increasing demand for diesel. The higher international demand is causing diesel prices to soar. Except, as adam mickievitch points out below, in Mexico. But that's for another post.

Related entries in: Automotive | Power Sources/Controllers |

Reader Comments

(Add your comments)

at 6/4/2008 2:40:23 PM, go diesel go germans said:
diesel costs less to process another scam on the consumer

at 6/4/2008 2:56:43 PM, W17053 said:
Your "article in the WSJ about refinery output" link is bad.

at 6/4/2008 2:58:05 PM, Mikey said:
Modulating refiner’s process flow levels to “just in time” values to meet the demand, causes “market forces” to artificially inflate prices. Come on people wake up!!! Diesel refining does cost less than gasoline, reformulated or not! And it all comes from the same barrel. (or bottom of.) Think about it.

at 6/4/2008 3:03:07 PM, Stiggle said:
I find it interesting that in this artical there is a reference to .."Strained global refining capacity." and then a reference to US refiners cutting gasoline production due to the increased price of diesel. All the while oil producers and refiners are making record profits with reduced production and ever inflating oil prices...It's better than a license to steal.

at 6/4/2008 3:03:30 PM, StanG said:
Diesel oil in Europe has been low sulpher for about 20 years. Diesel is still cheaper in Europe than here, even with the fuel taxes they charge there.

at 6/4/2008 3:10:54 PM, Brian Empey said:
The US is STILL exporting diesel. All these bogus excuses are nothing but marketing BS. The math is simple: if diesel is priced based on cost (about 70% of gasoline) and people buy diesel cars (using 70% as much fuel) what happens to revenues? 0.7 x 0.7 < 0.5 or they drop in HALF! Not what the shareholders of the oil-companies want. So consumers and environment be damned, the oil-companies will do everything they can to preventing the normal course of history (all consumers migrating to fuel-efficient cars powered by lower-cost diesel) from playing out. Its all about $$$$$$$

at 6/4/2008 4:43:12 PM, adam mickievitch said:
interestingly the diesel is still below $2.0 [ actually just 5.5 Peso and 11 Peso = 1 US Dollar] here in Mexico, any good excuse for the three digit billion profit for the US oil companies ?

at 6/4/2008 6:53:08 PM, Tim L said:
There is some truth to the refining capacity, but not because there aren't enough refineries. It's because different states and even some of the larger cities (Atlanta for example) have set there own regulations about sulphur content among many ohter factors. The result is that the refineries have to make smaller batches of 'special recipes' which increases production costs, distribution costs, etc. Closely read the text above and you'll see it mentioned, however briefly, about the '...increased cost of diesel production and distribution...' Thank your local wacko environmentalist for that. While you're at it, pat them on the back for keeping us so dependant on external oil resources to keep our cars on the road by making oil exploration nearly impossible. These so-called "windfall profits" (whatever that means - do doctors/lawyers/Bill Gates/Donald Trump/etc have windfall profits?) can't even be used to explore for more oil fields that would increase supply to meet the ever growing demand because of the off-limits rulings that have been pushed through. when they are rewarded for investing in a risky market and they are rewarded for providing a service?

at 6/4/2008 9:56:44 PM, John R said:
Why did the price increased sharply when the refiners were forced to get rid of the sulfur. Coincidence? No, we are taken for a ride. It cost less to produce diesel than crack oil to get gas but the refiner drag their feet to upgrade their antique installation. Wake up, the refiners are praying on Americans ignorance. The rest of the world uses diesel for good reasons.

at 6/5/2008 12:38:42 AM, IanP said:
In many respects the price hike in Deisel is a good thing. Deisel is a dirty fuel and probably the major cause of the very high rate of Asthma in the UK, where deisel accounts for around 90% of all fuel related airborne particulates. So a move to a cleaner gasoline is preferred. However, as we saw after the '39-45 war many of larger lorries (trucks) can burn alternates, such as powdered straw, wood dust and the like. Some of our truckers are experimenting with this now. This is cheap but seriously dirty, as is the modern equivalent, biodeisel. I guess that we are going to see a lot of investment in alternatives with fuel at current prices. I only hope we come up with a truly clean answer.

at 6/5/2008 1:29:52 AM, LS said:
Diesel cars are less poluting than regular gas, costs less to produce, and cars get better milage. In Europe, most cars are turbo diesel, and you can't tell the difference in terms of performance. America has made some bad choices. The truth is that Diesel is already as good as Hybrid - so Hybrid Diesel will be even better. What we need is a real energy policy aimed at clean air - and that comes from looking for efficiencies. Companies do what is best for profit first and foremost. The main value of Government is to legislate so that what is best for all is policy, not what is best for a few. In 2008, we have a chance to change this back to what it should be from what has been a disaster for the Americans and the world for 8 years!

at 6/5/2008 3:32:37 AM, GilesC said:
Not sure where your pricing information comes from StanG - Diesel is currently averageing £4.92 per US gal. Thats $9.60 per US gal at the current exchange rate. The rest of Europe is a little cheaper, but the US is way way cheaper than Europe for fuel in every form - petrol (gas to you), diesel, heating oil etc etc.

at 6/5/2008 3:41:39 AM, Steve B said:
I''m not sure which part of Europe Stan G was talking about when he said it''s cheap - the pump price of diesel in the UK is close to 9 US dollars per US gallon! Twice the price of the USA. You don''t know when you''ve got it good!!!

at 6/5/2008 4:01:09 AM, Tailwagger said:
Here is the more relveant question. If global demand is increasing, how is it that we havent begun the switch to B10 or better? Given it is proven to cut emissions and presumably the bio portions constituent parts havent seen an 100+% rise in cost in the past couple of years, why isnt there more Biodiesel availablity?

at 6/5/2008 6:09:48 AM, BEVENDRA RAWAL said:
Diesel engines are more efficient than gasoline but the car manufacturers in America can not think in positive direction. Also they lobby to the government not to impove the standards for long time which is 2020. Looks like government is run by lobbies and not by elected officials.

at 6/5/2008 7:07:48 AM, arclight_arclight said:
All: I have seen an awful lot of "facts" bandied about in this topic, but I haven't seen much in the way of real analysis. I will agree that the automotive manufacturers are definitely to blame for not looking harder and faster for alternatives. I also agree that some environmentalists have hamstrung rational energy deployments (e.g. special formulations for this and that city, instead of a single formulation that meets all the requirements (duh)) in order to further their various emotional agendas. All we can do is to keep pressing our leadership to press in turn the various position-takers to be ruthlessly accurate and complete in their analyses, and read ourselves in order to find what bits of truth can be discerned through all the emotional nonsense. Perhaps we should start punishing anyone who fails to announce the potential holes in their "facts" with a horsewhipping.

at 6/5/2008 11:53:37 AM, Matt said:
Some good comments up there, but..... Yes its a $$$$ game, and Yes Diesel costs less to make than gas, but remember that every Jet, Train, Semi, and Ship burned the same fuel; Diesel, JetA, Mil jet fuel, etc are all Kerosene. There is some truth to the volume of diesel being used, but still the fact remains that you can get far more milage out of a diesel hybrid than a gas hybrid. Its what trains, APU's, and ships do.I agree that we need more diesel cars, but car makers wont make more because the stupid people in the country wont buy them thinking irrational negatives about the idea.

at 6/9/2008 6:59:46 PM, ryanb said:
There is some claim on internet of generating small amount of hydrogen and injecting to engine cylinders to improve gas mileage. Are they scams ??? Any inputs anybody ??? Thanks,

at 6/10/2008 11:27:31 AM, Shell said:
Margery Conner it looks like most of the comments here don't agree with you, what is your take on this? Shell (just a nickname no relation)

at 6/10/2008 11:27:42 AM, Shell said:
Margery Conner it looks like most of the comments here don't agree with you, what is your take on this? Shell (just a nickname no relation)

at 6/10/2008 1:37:51 PM, W17053 said:
Your "article in the WSJ about refinery output" link is still not found.

at 6/10/2008 2:45:14 PM, Craig said:
I own a 2003 VW Golf that has a 1.9L turbo diesel engine. I find the performance acceptable and it gets 47-51 mpg depending on the traffic and how I drive it. The VW diesels have been around (mosy commonly in the rabbit model that preceeded the Golf) for several decades now. They don't sell many because the diesel engines are more expensive and there is a stygma atached to them too, like cold weather starting and sooty exhaust. That's simply not true of today's diesels. The principal reason other auto manufacturers don't offer a diesel is the added cost. This is also the reason that Toyota recently expressed for not ddveloping a diesel engine for use in their hybrids.

at 6/10/2008 2:52:17 PM, greedy said:
The oil companies figured out how to make a lot more money without public outcry. Just increase the price of diesel. The majority of the public does not use diesel so they won't care that much. The industries that do, trucking, trains, ships and planes can pass on the higher costs in the prices they charge. The general public won't connect the dots and the oil companies can enjoy the immense profits. It just simply does not cost near as much to produce a gallon of diesel and it does a gallon gasoline. Who is going to stop them?

at 6/10/2008 2:53:25 PM, justDIY said:
what does this have to do with electrical engineering?

at 6/11/2008 12:09:24 AM, rene said:
in The Netherlands the price of regular gas is double the price in the US, so $8.5/gal for regular gas.

at 6/11/2008 2:45:41 PM, Michael said:
I was in Germany a week ago and gas and diesel were both 1.5 euros/liter, roughly $9/gallon. Our Opel Vectra diesel blew the doors off our other car, a gas powered Ford Focus. As for blame, look no farther than the mirror. Americans have been looking for more power, not economy. The auto manufacturers, including Toyota, just give us what we want. Why would you need 268 hp on a Camery when about 120 will do? Well, it''s because we asked for it. Auto manufacturers need time to change the product mix to amortize their investments. But our tastes suddenly change when gas prices zoom up. Just a few years ago, gas was $1, new SUV''s clogged the road. We are getting what we asked for with a few year time lag. So quit griping about gas prices. If you stop driving, the gas cost will be zero.

at 6/11/2008 7:12:27 PM, Bob Hale said:
I find it remarkable that most folks are apparently unaware that diesel fuel has both a larger mass content (pounds per gallon) and heat content (Btu per pound) than gasoline. Because these should be multiplied together for any rational price comparison, diesel is obviously a far superior fuel thermodynamically. Is this a total surprise to only Americans?

at 6/12/2008 4:48:08 AM, Darren Holdstock, UK said:
The percentage of crude oil that can be turned into diesel in the intitial fractionating process is pretty much fixed, and so a higher demand for diesel will drive up the market price as it can be sold at an inflated premium. This is not good news for me, as I''m currently paying just over $10 per US gallon. Refining process schematic: www.ukpia.com/Portals/0/Repository/ManufacturingDiagram.pdf

at 6/15/2008 6:28:10 PM, Meredith Poor said:
I wonder if anyone reading this is familiar with Fischer-Tropf synthesis? One can make hydrogen from water, and CO (carbon monoxide) by passing heated (800 degrees C) CO2 over pure carbon (coal, graphite, etc.) The H2 and CO can be combined to make any alkane (fully saturated hydrocarbon) one wants, including diesel. In short, we can easily make automotive fuels from the CO2 component of air and water. This becomes economically viable at $4.60 a gallon, which is already true in California (i.e., 10% of the entire US market). Search term: "Green Freedom". Someone at Los Alamos is promoting this idea.

at 6/19/2008 2:29:27 PM, F-T synth said:
Sure, and we'll heat those gases up to 800 C using ___ ? That pesky little law of conservation of energy again.

at 6/19/2008 5:25:40 PM, Rusty said:
Using liquid fuels for stationary applications ought to be outlawed. In fact, liquid fuels should be reserved for aircraft. Personally, I'm working on a steam motorcycle powered by burning junk mail!!!

at 6/27/2008 12:32:23 PM, Meredith Poor said:
"Sure, and we'll heat those gases up to 800 C using ___ ? "... Concentrating solar. Works up to 3000 degrees C.

at 6/30/2008 6:00:26 PM, Joe T. said:
The oil companies still continue to make up new stories to justify their price gouging to no end. I can remember vividly in 1979 when gasoline was 5-6 times higher in price then diesel. They were making a profit then selling to the open market. How long can the consumer put up with this crap. You can also bet that the solar restriction on BLM on public land was pushed by big oil to limit competition.

at 7/7/2008 2:02:29 PM, Faris said:
Yes water gas has been used a long time Meredith; however, it was the problem of getting rid of all the byproducts that started the modern chemical industry - think analine dyes in Germany. They had mounds of solid waste that were useless from making water gas for heat and light in Europe in the late 1800s.

at 7/7/2008 2:26:23 PM, Tom said:
I''m anxiously waiting for Honda''s clean diesel to be marketed in the US. It is expected in the 2009 Acura tsx. I agree with LS, the hybrid-diesel should be the next power train developed. Combine the strengths of the diesel with (Toyota) hybrid technology. I''ve driven two GM light duty diesel trucks for over 300,000 miles, getting getting much better milage and engine lifetime than their gasoline counterparts.

at 7/7/2008 4:11:14 PM, M. Simon said:
"The oil companies still continue to make up new stories to justify their price gouging to no end." Well sure. You have to wonder why they were so stupid as to only charge $3 a gallon last year. I think the guys running those corporations should be sued for not getting all the money that can for their product. Cheating their shareholders.

at 7/8/2008 1:45:46 AM, Smiler said:
Not worth arguing about, we will all be dead soon anyway.

at 7/8/2008 10:27:00 AM, Tender Vittles said:
It's about the money, stupid!

at 7/9/2008 2:07:09 AM, Smiler said:
They all realise that we will all be dead soon, so grab as much as you can!

at 7/30/2008 3:02:24 PM, Profit is king said:
Diesel refining and gas refining is exactly like semiconductor manufacturing. When demand is high, the manufacturers are not about to add another facility, that would drop the bottom out of their volume pricing. The new facilities come online slowly, incrementally, after a downturn and when demand is just ticking back up, so the demand/capacity ratio stays steady or even climbs as the facility comes up. This offsets any price deals the market tries to make. It's all about profit, not at all about ability to produce more.

at 8/14/2008 2:53:12 PM, Chris PE said:
History repeats itself.Cars started as electric and they will end up as electric.All those huge oil companies hold thousands of patents in the safes."Smiler" is right.They grab what they can.I watched a History channel last night and heard all the "incredibly hard" processes described , as well as found out that propane is FREE during any oll fraction , as well as other plethora of byproducts that we pay premium prices for.We have surely drifted away from "supply and demand" rule, because as "Mikey" said the big business "modulates" prices and market by producing more , or less ,assuring changes in supply and demand.Not fair! Certainly not American!!!! We did not use to do it like that!

PowerSource

Profile

RSS Feed

Recent Posts

Recent Comments

Most Commented On

Archives