Did anyone else notice this in the 2nd. paragraph?
“would convert low-cost natural gas into clean-burning diesel it can sell at much higher prices.”
You notice there was no mention of making the Diesel any cheaper, only converting it so they can make more profit.
Not that there is anything wrong with profit.One might think if the initial product were cheaper, we could add in the extended cost of the plant and sell a cheaper Diesel.
LMAO Anyone see that happening?
Yep, saw that. Two things I took away from that sentence. First, since natural gas is so cheap as the input, the resulting product (diesel) can be sold at a high profit ... the spread between the input fuel and resulting product which can be sold at a higher price.
Second, the rest of the world runs much more diesel than regular gas as we do in the US, and that diesel costs much more overseas than it does here. Clearly they already have plans to convert natural gas to diesel here then export it overseas to maximize their profits.
I think the point here, and of course I may be wrong, is that the cost of converting oil into diesel with the EPA requirements is driving the cost of diesel to the high cost it is today.
Gas to liquid conversion will be able to compete with the oil to diesel conversion at the present gas per BTU cost at the well head.
There have been some pilot plant conversions that have been successful and now it is time to take these to full scale production facilities.
Capitalism as it is, it will probably come in cheaper at first and slowly work its way back up. However, I am not sure if it is successful what will the refineries do with the waste stream that they converted to diesel. Maybe someone can answer that.
I don't know what the ratio is, but if (f'rinstance) two parts NG makes one part diesel ... it's an ultimate loser.
So? No matter how successful the plant is, the percentage of world supply of diesel it produces will be miniscule. It won't affect overall diesel price, and will be very profitable.
What are they supposed to do? Should they say, "We were able to make this diesel more cheaply, so we'll take less than market price for it?"
A driving force for innovation is the prospects of outsize profits for a while, until everyone else catches up.
Didn’t you follow gas shale fracing? Ever hear of supply and demand?
Its unlikley the GTL producers like SASOL will be able to manipulate the market and if too many build these plants they too will see the same result as do the shale gas companies.
Add fuel competition from trucks and possibly locomotives going to LPG, new huge oil shale fields and Canadian oil via Keystone PL, at some tipping point fuel prices come down, of course aside from government meddling.
This one plant is not going to produce enough to make any significant change in a large volume globally priced commodity.
If there was not a significant difference in cost for the feedstock to the product, the $19 Billion plant would not get built.
But any additional diesel puts pressure to lowering the price. And proving the first plant works economically builds the incentive to build more plants and likely creates a path for technology advances that further lower the cost.
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Second, the rest of the world runs much more diesel than regular gas as we do in the US, and that diesel costs much more overseas than it does here. Clearly they already have plans to convert natural gas to diesel here then export it overseas to maximize their profits.
That great deferential in price is due to more taxes. The wholesale price in Ultra Low Sulfur Diesel varies little between places like Europe, South America and North America.
I think out of the box...
What if the products sole customer is an Airlines? I.E. JP-4/8 at much lower prices?
Was it Delta that bought a refinery in PA a year ago?
What if via their vertical integration, they start snagging all the PA Macellus Gas for JP conversion at a price point that gives that Airlines some margins again?
That is a game changer....