From: Ryan Gill (rmgill@mindspring.com)
Date: Fri Nov 18 2005 - 23:14:08 PST
At 8:16 PM -0700 11/18/05, Kirk Thompson wrote:
>Technically:
>The way I understand it is simply supply and demand.
>
>Fuel oil, Diesel, and kerosine (listed in order
>from lower grade to higher) are actually
>by-products of the different stages of the
>molecule cracking process that makes gasoline.
>These fuel oils are actually not intentionally
>made. Gasoline is what is desired to be made in
>the refining process and since diesel is really
>just a by-product, when there is a strong demand
>(more vehicles using diesel) and there is not a
>large supply (because if there is plenty of
>gasoline, you don't need to make more and
>therefore no more diesel is made), it drives the
>cost up.
Kerosene and Fuel Oil are thicker, Gasoline is
more aromatic. Diesel is a mix of several
(benzine included) aromatics that are nearly the
same as Kerosene. The refining process will make
a given amount of each, however, the process can
be tweaked by additions of other chemicals to
crack different molecules and make more or less
of a given amount of fuel.
>Personally:
>I think we are getting screwed by Big Oil.
>Record profits for the last 10+ years and 2005
>being the best in history.
As I understand it their bulk of profits are from
the massively increased demand for crude oil in
India and China. The refined fuels are made
mostly in the US with some being made in Mexico
and Canada. Europe has been selling us some
gasoline because they've been increasing the
number of diesel powered cars spurning a growth
in the need for diesel and a lessening of
gasoline. The US market has increased use of all
fuels. Refined fuels are a very small part of
their market.
Competition will drive the prices back down. The
fact that we have a new refinery being built for
the first time in 20 years should help to. It'll
be a state of the art facility which should give
it an edge. The DOE web page has a lot of
information on the market trends and why the
prices actually get driven up.
see http://www.doe.gov/engine/content.do?BT_CODE=PRICESTRENDS
One key thing to remember is that fuels and the
raw crude are bid on based on the prices and
expected price increases. If prices are expected
to go up, companies will bid on lots of fuel to
guarantee supply, this will drive the price up a
bit but will also at the same time limit the use
because it becomes more expensive. If the supply
is refreshed quickly, then being locked into the
price for the higher fuels more or less hurts the
company who has to sell at that price. The same
goes for bigger and smaller fuel stations
depending on the cycle time of their stock. More
cycle time and they'll be stuck with the higher
price because that's what they bought it at.
They'll try to sell it at the lower price.
There's a Citgo around the corner from me that I
bought fuel from before I knew better. They're
charging 3.59 a gallon for diesel. The Quicktrip
that's 3 exits up I285 is selling it at 2.35. The
Quicktrip gets their diesel in in large lots
because they have 16 Truck sized pumps (master
slave units) and they are an in town truck stop.
--
--
Ryan Gill rmgill@SPAMmindspring.com
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I speak not for CNN, nor they for me.
But I do work there and still like the company.
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