Dramatic drop in gas prices doesn’t carry over to diesel

Dallas Morning News ^ | : 10 December 2014 | JAMES OSBORNE

[EternalVigilance]

Dittos.

[taxcontrol]

The retail price differential between B99/B100 and #2 Diesel as of July 1, 2014 is 4.18 for B99 and 3.51 for #2. This means that there is a 20% premium for bio-diesel over #2. As production volume increases, that differential will shrink. Had the government been trying to reduce US dependence on foreign oil, and worked to increase bio-diesel production, this small differential would have already disappeared.

One example that I presented on how this could have been achieved, would not have cost the US taxpayers anything additional. The US government via the department of agriculture, already makes CRP (crop reduction payments) to farmers to NOT farm.

By restructuring the program so that farmers would be required to produce X number of gallons per Y number of acres eligible for CRP payments, the farmers who are in the best position to produce bio-algae based bio-diesel would have a fuel supply available to them right at the farm. If the farm produces more bio-diesel than they use on the farm, the excess can be sold into the market. For example, if a farmer wants to enter 600 acres of farm-able land into the CRP and receive CRP payments; instead of the current process of doing nothing, the farmer would have to show annual production of Y number of gallons of bio-diesel.

By adjusting the X:Y CRP ratio, there would be more and more bio-diesel brought into the economy. This would work to lower (and eventually eliminate) that 20% differential and also provides an additional revenue stream for farmers. Again, without any additional taxes.

Had this been started, and gradually increased, back in the '70s and '80s, I doubt we would have that 20% differential now ... and it is possible that bio-diesel could have been less costly than #2. But hindsight is always 20/20.

[thackney]

Had the government been trying to reduce US dependence on foreign oil, and worked to increase bio-diesel production,

Can you help me understand how you think they should select bio-diesel over other fuels and "encourage" it, and why?

The US government via the department of agriculture, already makes CRP (crop reduction payments) to farmers to NOT farm.

One bad idea, does not justify the next.

[nascarnation]

Doesn’t biodiesel (at least in high concentrations) have significantly less BTU/gal than petroleum derived?

The GGE equivalence shows B100 bio at 104% of gasoline and #2 petro at 113.6%.

[taxcontrol]

Are you also recommending a mileage tax biased with vehicle weight, efficiency, trailers, etc

No, I am saying that if we are going to have the EPA messing with emissions like they currently are, that those emissions should be based on miles traveled per gallon of fuel. Current EPA regulations are based on the engine size or vehicle weight. For example here is the table for motorcycles: http://www.epa.gov/otaq/standards/light-duty/motorcycles.htm

Here is the table for light duty vehicles; http://www.epa.gov/otaq/standards/light-duty/ld-cff.htm

I contend that it should be based on MPG (efficiency) not size.

[thackney]

I contend that it should be based on MPG (efficiency) not size.

By taxing on consumption, mpg is already part of the basis. You already established the different tax rates for gasoline and diesel offset the different energy content (mpg) of the fuel.

[Paladin2]

Isn’t there cross Atlantic trade in finished products with Europe having excess gasoline and the US having excess Diesel based on the different vehicle fleets and non differentiated straight run refining outputs?

[Paladin2]

I think the $1/gal BioDiesel subsidy went away.

[old gringo]

i have bought diesel for 9 cents a gal.gas 14 cents.

[thackney]

Yes, although not just Europe. And that is not new.
We were exporting the diesel through the 2009 dip as well.

[taxcontrol]

I am not talking about taxing. I’m talking about the EPA emission standards.

[conservatism_IS_compassion]

Basically home heating fuel oil and diesel are the same stuff, to a first approximation at least. That alone should make diesel more scarce and expensive in the winter than in the summer.

[Red Badger]

We had a heating oil furnace when I was a kid. I’d have thought people would have switched to natural gas by now.................

[American Constitutionalist]

Eventhough diesel costs more, a diesel engine is more efficient than a gasoline engine.
Your getting more bang for your dollar with diesel than gasoline.

[smokingfrog]

Is that the straight gasoline price or the 10% ethanol price?

[EternalVigilance]

Ethanol.

[EternalVigilance]

If you live in Iowa and you don’t burn at least some corn, they take away your driver’s license.

Just kidding ...

[thackney]

If a refiner distills the crude in summer or winter doesn’t the oil produce the same amounts of each chemical?

I came across a good overview that better explains the why to your question from yesterday. I suspect you were only thinking of the separation portion. This is probably more than you wanted to know.

All refineries perform three basic steps:

Separation
Conversion
Treatment

http://www.eia.gov/energyexplained/index.cfm?page=oil_refining#tab2

Separation

Heavy petroleum components or fractions are on the bottom; light fractions are on the top. This difference in weights allows for the separation of the various petrochemicals. Modern separation involves piping oil through hot furnaces. The resulting liquids and vapors are discharged into distillation units.

Inside the distillation units, the liquids and vapors separate into fractions according to their weight and boiling point.

The lightest fractions, including gasoline and liquid petroleum gas (LPG), vaporize and rise to the top of the tower, where they condense back to liquids.

Medium weight liquids, including kerosene and diesel oil distillates, stay in the middle of the tower.

Heavier liquids, called gas oils, separate lower down, while the heaviest fractions with the highest boiling points settle at the bottom of the tower.

Conversion

Cracking and rearranging molecules takes a heavy, low-valued feedstock and changes it into a lighter, higher-valued output such as gasoline. This is where fractions from the distillation units are transformed into streams (intermediate components) that eventually become finished products.

The most widely used conversion method is called cracking because it uses heat and pressure to crack heavy hydrocarbon molecules into lighter ones. A cracking unit consists of one or more tall, thick-walled, bullet-shaped reactors and a network of furnaces, heat exchangers, and other vessels.

Cracking is not the only form of crude oil conversion. Other refinery processes rearrange molecules to add value rather than splitting molecules.

Alkylation, for example, makes gasoline components by combining some of the gaseous byproducts of cracking. The process, which essentially is cracking in reverse, takes place in a series of large, horizontal vessels and tall, skinny towers.

Reforming uses heat, moderate pressure, and catalysts to turn naphtha, a light, relatively low-value fraction, into high-octane gasoline components.

Treatment

The finishing touches occur during the final treatment. To make gasoline, refinery technicians carefully combine a variety of streams from the processing units. Octane level, vapor pressure ratings, and other special considerations, determine the blend.

It is the reason the simplified flow diagram of a refinery looks like:

Keep in mind each one of those boxes above represents many different pieces equipment used together in a process unit. For example:

Fluid Catalytic Cracking unit

Delayed coker

[Red Badger]

Thanks!..........................

No wonder refineries cost billions of dollars. The cost of the piping alone is humongous!..............

[Fresh Wind]

Meanwhile, various state governments are licking their chops at the prospect of taking advantage of the low gas prices to raise gas taxes. Can’t let the consumers catch a break.

And guaranteed, once gas prices rise again, the higher taxes will stay forever.