Gas prices

[desdawg]

Yesterday I went into town and noticed the gas price was $2.31/gallon at my preferred station. I had some other errands to do which took about 1-1/2 hours then I went to fill up. When I got back to the station the price had dropped to 2.28 so I had gained 3 cents a gallon in that time. Whoever thought I would be happy to be paying only $2.28 a year or so ago. I have been conditioned. I guess it is all relative.

[apaknad]

$1.98/gal here in south central michigan. i never thought i would see that again. i wonder how long this will last? maybe all the hybrid/electric cars coming out soon and the depression/recession makes the controllers of gas/energy prices feel they may have killed the goose that layed the golden eggs.

[desdawg]

If it got to under $2 there maybe I have some more downside to look forward to. We seem to be a little slow on catching up here in AZ.

[Pox Eclipse]

The downside to cheap gas is it disincentivizes the manufacture of high mileage and alternative energy vehicles.  After the gas crisis in the seventies, Detroit tooled up to make small cars, but got caught with her pants down when oil dropped to $11 a barrel, and everybody bought foreign pickups and SUVS.

In many ways, high gas prices are the best thing that could happen to us.  We certainly won't achieve energy independence when crack gas is less than $2 a gallon.

On the other hand, I found a neat page on MSN where you can enter your zip code, and it will list the cheapest gas in your area:

http://autos.msn.com/everyday/GasStationsBeta.aspx

[glenn kangiser]

Detroit always seems to be behind when it comes to providing the cars the people want. 

Unions - while good in one sense have sent the auto manufacturers overseas for cheap labor- their CEO's all want the fat paycheck at the expense of the worker.  Looks like it is near to doing them in.  The parts are not American anyway.  It does provide some jobs but the entire business sector is going global.

They want huge profits - we want a car that doesn't fall apart and gets a hundred miles per gallon while hauling the whole family.

[Sassy]

I went into town yesterday am to pickup our dogs from the dog pound  & saw that the price was $2.55 for regular - in the afternoon I had to take the dogs to get rabies shots & go to the post office - the price was down to $2.45 for reg.  10 cents in a matter of a few hours.

Right now, from what I've read, they're trying to put the squeeze on Russia & the Middle East by dumping prices so that their economies will be destabilized...  I'll have to find some sources for that, but have been reading about it for the past few days... 

[ScottA]

I filled up this morning for...get this..$1.89 a gallon. Tell me there's not something crooked going on in the oil markets. Go ahead tell me it's a fair market. 

[glenn kangiser]

YHTBSM.....

Don't ask - it wasn't nice....

[ScottA]

My dad told me years ago that they use the price of gas to throttle the economy. I never really thought much about it till recently. I'm starting to think he was right. He also told me there was no oil shortage.

[MikeC]

Diesel is $1.35 MORE per gallon here than gas.  How can this be?  Diesel has gone done since high of nearly 5 bucks/gal, but the incredible spread remains.

[desdawg]

There is more demand than there used to be and there is a captive market. So the fix is in. If you have to use diesel you are going to get ripped.   

[MikeC]

ummm, isn't there more demand for gas as well?  and are not gasoline users tied to the product too?  and far more of them?

it is just not making sense to my simple mind.

[glenn kangiser]

There is more power stored in a gallon of diesel than a gallon of gas.  I heard once that they were cracking diesel to make more gas too.  I think it is a bit of trying to see what the traffic will bear.  How much can they charge and still sell it.  Apparently a lot.  Trucks and heavy machinery require it for the most part - likely a bigger market than cars now.

[MountainDon]

A barrel of oil is 42 US gallons. A fractional refined barrel gives us approx 20 gal of gasoline, 7 gallons of diesel, 3 gallons of jet fuel, 2 gallons of propane, 2 gallons of heating oil plus other stuff.   

Simple fractional distillation (heating to certain temp ranges and condensing the gasses provides the basic products, propane, butane, gasoline, kerosene, diesel, lubricating oil, heavy fuel oil, and residuals (coke, asphalt, tar, waxes). That's from the lightest to the heaviest; the products with the fewest atoms to the most atoms in more complex chains.

A heavier item can be broken down (cracked) into lighter components. Lighter components can be combined to make heavier ones (unification). The extra steps increase costs. As we use more and more diesel more of it has to be derived using more complex steps.

That's a simplification...

Interestingly when the 42 gallon barrel is processed it yields about 44 gallons of finished products.

[MountainDon]

Diesel prices could continue to get worse... Currently only over the road diesel must be the Ultra Low Sulfur Diesel. By 2010 off highway diesel must be ULSD, by 2012 railroad and marine diesel must be ULSD, by 2020 bunker oil (big ships) must be low sulfur. Add to that I've seen estimates that diesel use will increase at a rate faster than gasoline for the next 20 years and that the US economy will be more dependent on diesel than gasoline.

It seems to come down to we want more diesel than can be extracted from a barrel of oil. So just as demand for crude oil drives the price of a barrel, demand for one component of crude oil drives the price of that component. Up or down. Gasoline may cost less and diesel will cost more. Supply, Demand, Price.

I think I'm glad I passed on a chance to buy an older Dodge Cummins last year.

[glenn kangiser]

Thanks for the detailed explanation, Don.  Very informative.

[MountainDon]

The Wall Street Journal
July 2008

The drop in fuel consumption continues. The Wall Street Journal reports that "gasoline consumption dropped 3.3% from last year to 9.347 million barrels a day." This puts current domestic gas usage at the lowest level since 2003, effectively rolling back five years of growing demand. Consequently, fuel supplies at refiners are growing, up by one million barrels in the last week alone. Of course, compared to 9.347m barrels per day of consumption, having an additional million barrels in inventory is hardly a glut. The reduced consumption started with a one percent drop (compared to last year) during April, ramped to a 2.2 percent drop in June and then hit 3.3 percent during the week surrounding the 4th of July. But, while consumers are cutting back, trucking and farming are doing the drunken sailor routine. U.S. diesel consumption is up a full six percent compared to last year– even though diesel fuel prices are up 65 percent while the price of gasoline rose by only 38 percent. Ironically, some of the boom in diesel fuel use is due to increased ethanol feedstocks and the fleet of tanker trucks required to move the stuff around. (Gasoline can be transported over long distances in pipelines; ethanol has to go one tanker truck at a time.)

[desdawg]

I had a Chevy pickup with the GM duramax diesel. I traded it in last spring because of the cost of diesel fuel. It used plenty of it. I still have dump trucks and a service truck as well as all of the tractors that burn diesel. That seems like enough. If I ever start the excavating business back up I will buy diesel fuel. Right now everything is parked. More illiquid assetts.I need a bailout.

[peternap]

The other side of the coin with diesel...is that we can make our own homegrown diesel. We can also do the same thing with ethanol, it's just harder and illegal to make.

Bio diesel and waste diesel may also be illegal to make in the future and is currently illegal to use for most on road applications. The difference is, we don't need a still and can stay under the radar very easily. I am currently using 20% waste products in my diesel. It makes a big difference in the cost per gallon.

[NM_Shooter]

So... back when diesel was nudging $5 a gallon, all the food prices were jacked up because of "the cost of delivery".  I wonder when the food prices will relax a little?

[glenn kangiser]

I don't see them dropping much if any, Frank. 

One of their new tactics is smaller sizes for the same at first then later for a larger price.  Inflation should also kick in soon with the only way being up in price.

Minor relief, maybe, but I think it is not wise to count on it.

[harry51]

Diesel prices could continue to get worse... Currently only over the road diesel must be the Ultra Low Sulfur Diesel. By 2010 off highway diesel must be ULSD, by 2012 railroad and marine diesel must be ULSD, by 2020 bunker oil (big ships) must be low sulfur. Add to that I've seen estimates that diesel use will increase at a rate faster than gasoline for the next 20 years and that the US economy will be more dependent on diesel than gasoline.

It seems to come down to we want more diesel than can be extracted from a barrel of oil. So just as demand for crude oil drives the price of a barrel, demand for one component of crude oil drives the price of that component. Up or down. Gasoline may cost less and diesel will cost more. Supply, Demand, Price.

I think I'm glad I passed on a chance to buy an older Dodge Cummins last year.

Nuclear power seems to be quite successful in Navy ships. Why don't we see it being introduced in freighters, etc.? (rhetorical question!)

A few years ago, I met Galen Winsor, a nuclear physicist. He told me the state of the art at that time was a reactor the size of a basketball that would be moved from car to car as the chassis, etc., wore out. He also said the cost of nuclear generated electricity, apart from artificial expenses like environmental impact reports, etc., was so low per kwh that it didn't make economic sense to meter its consumption. He favored small reactors located such as to minimize long distance transmission, thereby drastically reducing line losses.

It's fascinating to watch the vested interests manipulate us by means of propaganda, dis-info, fear, and misuse of government power. They use the same methods in every area, be it energy, health, the environment, or whatever, and for the most part, they get what they want.......because we let them. 

C.S. Lewis wrote in Mere Christianity: This is the key to history. Terrific energy is expended-civilizations are built up-excellent institutions devised; but each time something goes wrong. Some fatal flaw always brings back the selfish and cruel people to the top and it all slides back into misery and ruin."

Will the vast majority of us, who aren't afflicted with that selfish and cruel ambition, ever learn how to resist those who are? I hope so, because until we do, Liberty is only an illusion....

[glenn kangiser]

Very interesting and great points, Harry.

[NM_Shooter]

I like nuke power, but I doubt it will ever be a mainstream consumer fuel due to the extreme danger of exposure associated with it.  Every item that currently uses nuclear reactors for fuel has a group of folks around it with guns.

In order to make it transfer energy, they use steam to do this.  I just can't see steam powered cars coming back into style. 

You can make a nuclear battery, by shooting radiation into a P/N/P/N etc.  stack of silicon, but the power output is very, very small (micro-Watts).

Don't look for a Chevrolet Nuke anytime soon.  Can you just imagine what the greenies would say!!

[glenn kangiser]

hmm Wonder if we could make that charge my batteries, Frank.  I think I'll go with the safer rust battery option though-- decomposing old Coupe-de-villes etc. for the energy contained in their metal.  I need to start that.