The kid who delivers your pizza may be charging you an extra buck for gas, but for the guy that trucked the tomatoes, hauled the dough or milked the cows, passing along the fuel increase isn't as easy as pie.
From truckers and farmers to loggers, construction workers and fishermen, skyrocketing diesel prices are pushing what many consider the backbone of the American economy right up to the breaking point.
"I'm in debt," says Jim Gossett, an owner/operator truck driver with a wife and daughter in Chapel Hill, N.C. "Do I turn in all my equipment, potentially lose my home?"
For the last nine years Gossett has driven a truck. For the last few he's been running a specialized carrier, delivering boats to marinas and dealers across the country.
He says his profit margin used to be around 25%. But with the near-tripling of diesel prices over the last few years, he now says that has been cut to 5%.
He says cutthroat competition in the industry means he's unable to pass along the increased cost.
_________________ "Thank you for attending the oil age. We're going to scrape what we can out of these tar pits in Alberta and then shut down the machines and turn out the lights. Goodnight." - seldom_seen
Joined: Jun 03, 2005 Posts: 216 Location: New Jersey
Posted: Thu Mar 27, 2008 5:49 pm Post subject: Re: Record Diesel engine fuels price thread.
Do you think it's possible that producers are passing along higher producer prices on diesel and not on unleaded gasoline? I know the two products are different, but if oil companies were desperate to keep the lid on public outrage over fuel costs (and the resulting possibilities of windfall profits taxes, regulation, and liberal progressive government, might they just jack up the price of diesel to balance the budgets?
Let me know if this is an impossibility. I'm just trying to figure out what is going on.
Joined: Oct 23, 2004 Posts: 5914 Location: New Jersey
Posted: Thu Mar 27, 2008 6:57 pm Post subject: Re: Record Diesel engine fuels price thread.
Waterthrush wrote:
Do you think it's possible that producers are passing along higher producer prices on diesel and not on unleaded gasoline? I know the two products are different, but if oil companies were desperate to keep the lid on public outrage over fuel costs (and the resulting possibilities of windfall profits taxes, regulation, and liberal progressive government, might they just jack up the price of diesel to balance the budgets?
Let me know if this is an impossibility. I'm just trying to figure out what is going on.
I am not an expert on refinery operations but from what I've read here on how a barrel of oil is cracked into components, such as diesel and gasoline, output can not be varied very much once the refinery is set up to operate in a certain way (some adjustments can be made during maintenance operations).
Presently diesel is in short supply around the world, and since diesel is largely a free market worldwide, the US price pretty closely reflects the world price (if taxes were ignored).
Since gasoline is not in short supply, the price of gasoline may actually reflect the minimum price the refiners can sell it for. So no I don't believe that refiners have much control over the price once it's produced. However refiners could, and are, choosing to run refineries at reduced rates if their profit overall margin per barrel is low.
Joined: Oct 23, 2004 Posts: 5914 Location: New Jersey
Posted: Thu Mar 27, 2008 7:09 pm Post subject: Re: Record Diesel engine fuels price thread.
Note that South Korea has halted exports of gas oil (similar to diesel) and gasoline. I am not sure how much SK actually sends to the US, if anything, but it does mean that the US has to compete for a more limited supply of diesel due to many problems with supplies around the world.
Quote:
S-Oil declares force majeure after outage-sources
SEOUL, March 26 (Reuters) - South Korean refiner S-Oil (010950.KS: Quote, Profile, Research) has declared force majeure on April-loading oil products including gas oil and gasoline due to an outage earlier this week, two trading sources said on Wednesday.
Whether jet fuel supplies will be disrupted was not immediately confirmed as traders had different information.
"Gas oil and gasoline supplies will be delayed for sure, but S-Oil is saying that it has some stocks left for jet fuel," said a trader who buys products from the refiner.
But another jet fuel buyer in Asia said S-Oil had notified supply disruptions earlier in the day.
Using the historical ratio of crude costs to gasoline, 34%, oil at $105/barrel would now put gasoline at $7.35/gal. Someone is eating a whole lot of losses.
Posted: Fri Mar 28, 2008 11:03 am Post subject: Re: Record Diesel engine fuels price thread.
shortonoil wrote:
Using the historical ratio of crude costs to gasoline, 34%, oil at $105/barrel would now put gasoline at $7.35/gal. Someone is eating a whole lot of losses.
Brilliant! Succinct. Thanks for that chart. I have been wondering for quite a while now who is eating that and why. Are the refiners being magnanimous? Did they just wake up and say, Hey, these prices are going to be hard on the people, lets reduce our margins to barely above operating costs....
-G _________________ All right, you primitive screw-heads, listen up!
Joined: Sep 16, 2004 Posts: 4455 Location: Southwest WI
Posted: Fri Mar 28, 2008 11:08 am Post subject: Re: Record Diesel engine fuels price thread.
I know people here disagree, but i think someone in the government or in the shadows is keeping the costs low... I still wonder if we'll see $4 before GWB is out of office. Remember his little response to that reporter mentioning the prospect of $4? He hadn't heard about that. Maybe they'll keep the price low/riots low until they are in Paraguay? _________________ "Oil is going up because we use too much oil, and the capacity to replace reserves is dwindling"
-President Bush 11/07/07
Posted: Fri Mar 28, 2008 11:56 am Post subject: Re: Record Diesel engine fuels price thread.
gnm said:
Quote:
Brilliant! Succinct. Thanks for that chart. I have been wondering for quite a while now who is eating that and why. Are the refiners being magnanimous? Did they just wake up and say, Hey, these prices are going to be hard on the people, lets reduce our margins to barely above operating costs....
Well, where are the increased costs being made up. Ratios couldn’t have changed that much in 3 years, it is the same infrastructure, and profits were never enough in the industry to make up that kind of difference. Where is the money going, or rather, coming from?
The point is, that South Korea is shutting off gasoline exports because they aren’t making any money by refining gasoline and diesel. I seriously doubt that anyone is, and that is probably why utilization is now at an all time low.
Joined: Oct 23, 2004 Posts: 5914 Location: New Jersey
Posted: Fri Mar 28, 2008 5:05 pm Post subject: Re: Record Diesel engine fuels price thread.
Guess who is making up for the shortall caused by South Korea?
Yes the US. While US supplies of diesel run down to low levels and truckers complain about high diesel prices and plan protests, diesel exports have increased. While I am not an expert on this, usually the US does not export much diesel.
Per the Wall Street Journal, diesel prices are up 8 cents/gallon today and 126 cents/gallon over the last year.
Quote:
"I heard two, maybe three, cargoes done within the past 48 hours," said one Gulf Coast distillate trader.
Other sources said the cargoes were said to have been sold by Valero, and were destined for Chile and possibly Mexico who was short due force majeure due of South Korean barrels.
Diesels flat to strong on cargoes
Fri Mar 28, 2008 2:42pm EDT
Joined: Aug 17, 2005 Posts: 580 Location: Portugal
Posted: Sat Mar 29, 2008 8:00 am Post subject: Re: Record Diesel engine fuels price thread.
Quote:
I am not an expert on refinery operations but from what I've read here on how a barrel of oil is cracked into components, such as diesel and gasoline, output can not be varied very much once the refinery is set up to operate in a certain way (some adjustments can be made during maintenance operations).
I think you can dieselize gasoline and kerosene into diesel fuel, but that's a bit of an expensive technique.
Joined: Apr 28, 2005 Posts: 3655 Location: West shore Lake Eire, MI, USA
Posted: Sat Mar 29, 2008 12:59 pm Post subject: Re: Record Diesel engine fuels price thread.
whereagles wrote:
Quote:
I am not an expert on refinery operations but from what I've read here on how a barrel of oil is cracked into components, such as diesel and gasoline, output can not be varied very much once the refinery is set up to operate in a certain way (some adjustments can be made during maintenance operations).
I think you can dieselize gasoline and kerosene into diesel fuel, but that's a bit of an expensive technique.
Kerosene already IS diesel fuel, #1 to be specific.
How the heck do you make Gasoline diesel engine compatible, mix it 50:50 with motor oil? _________________ Oxygen: - An intensely habit-forming accumulative toxic substance. As little
as one breath is known to produce a life-long addiction to the gas, which addiction invariably ends in death.--Isaac Asimov
Joined: Aug 17, 2005 Posts: 580 Location: Portugal
Posted: Sat Mar 29, 2008 6:03 pm Post subject: Re: Record Diesel engine fuels price thread.
Tanada wrote:
1. Kerosene already IS diesel fuel, #1 to be specific.
2. How the heck do you make Gasoline diesel engine compatible, mix it 50:50 with motor oil?
1. Well, it's just a matter of definition. I'm used to 3-7 carbons = gasoline, 8-12 = kerosene, 13+ = diesel. This may vary.
2. No, you fuse small chain hydrocarbons into bigger ones. I.e. lump together 3 molecules of gasoline to make 1 of diesel. How is this done? I dunno, I just heard a guy from the local NOC saying they're thinking of doing it to get around diesel shortages. Maybe they heat up and pressurize the gasoline?
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