As I Had Thought

[Dave Whitmer]

Let me start out with the observation that the prices of gasoline and diesel are high. Obviously the price of crude has a big effect.

What I want to zero in on is the fact that diesel fuel costs eighty cents a gallon more than regular unleaded (or premium for that matter) gasoline. The US is pretty much alone in that difference.

This table is in euros.

http://gasoline-germany.com/international.phtml?changeto=EN

From the link:

England
91 Octane Gasoline: €1.34
Diesel: €1.22
Spread: Gasoline is 10% more expensive than diesel


France
91 Octane Gasoline: €1.39
Diesel: €1.32
Spread: Gasoline is 5% more expensive than diesel


Japan
91 Octane Gasoline: €0.97
Diesel: €0.75
Spread: Gasoline is 29% more expensive than diesel


Australia
91 Octane Gasoline: €0.94
Diesel: €1.18
Spread: Gasoline is 26% more expensive than diesel


Germany
91 Octane Gasoline: €1.43
Diesel: €1.33
Spread: Gasoline is 18% more expensive than diesel

But at my local gas station
91 Octane Gasoline: $3.83
Diesel: $4.45
Spread: Diesel is 16% more expensive than premium gasoline


So let’s put the myth that the spread of diesel over gasoline has anything whatsoever to do with world demand. In most countries that tend to prefer diesel cars, diesel is less expensive than gasoline. But in the US the reverse is true.

There is only one plausible reason: Ultra-Low (15 ppm) Sulfur Fuel is required ONLY in the US. It costs more money to remove the sulfur. This relationship was not true at all in 2006, prior to the advent of ULSD requirements. Gasoline and diesel cost roughly the same (gasoline was more expensive in summer, diesel more expensive in winter) prior to ULSD.

Diesel in the US is more expensive than gasoline and you can exclusively thank the EPA.

[bilbo]

The diesel vs gasoline spread started earlier than the advent of ULSD.
It is a policy that was designed and instituted by the oil refiners/distributors AND the futures speculators.
Speculators have ruined the fuel prices market.

[Dave Whitmer]

Gack! Another evil oil company conspiracy theory.

[DirtFarmer]

Hey Dave-

On the Glenn Beck radio program a week or so ago Glenn interviewed a former (until recently) president/CEO of a US oil company and asked a question about this. The oil exec stated that it is easier to charge more for diesel and jet-A than gasoline since those fuels are purchased more by companies and less by individuals. He said that they are taking extra high profits on the first two to "subsidize" a (relatively) lower profit margin on gasoline.

That said, I'm sure that the ULSD costs more to produce and does add to the cost.

[amunderdog]

I thought they got the diesel off a barrel of crude first.
But i saw the other day where they claimed that gas came of first, then the diesel etc so they have more gas than they know what to do with trying to make enough diesel etc.
Also the first rise in cost at pump was low sulfer diesel, then this new ULSD hit and it went up again, Then it combined with the high crude prices to put diesel over the top.

[Kaliburz]

Wow..... the US is the ONLY place that requires ULSD! Man, why do we have to be the guinie pigs!?

[drcampbell]

Didn't we have a refinery guy here last year say that the cost of complying with the ULSD standard amounted to 10-12 cents/gallon the first year and 3 cents/gallon thereafter, after amortizing the cost of sulfur-removing equipment? Can somebody in that industry confirm or deny?

Oil corporation propaganda agents are quick to point out how many millions of dollars they spend to comply but usually neglect to mention that the typical refinery processes more than five million gallons of oil daily. A million bucks thins out pretty fast when divided among that many gallons.

- - -

The US is not the only country requiring ULSD. Canadian on-road Diesel fuel is entirely 15 ppm, has been for more than two years, and all the rest -- off-road, marine & locomotive Diesel fuel -- is scheduled to be 15 ppm in the near future.
CEPA Environmental Registry - Regulations

The price ratio between gasoline & Diesel fuel in southwestern Ontario is about the same as in southeastern Michigan - the price of a gallon of Diesel fuel being about 20% higher than gasoline. (pretty close to the same price per kilogram or per BTU)
Nothing like the Pacific rim and European ratios cited above.


Since 2005, European on-road Diesel fuel has been limited to 50 ppm and 10 ppm fuel must be made available.
The European standard will be 10 ppm for all Diesel fuel in 2009. Refiners have certainly budgeted for sulfur-removing equipment by now, at very least.
Fuels: European Union


Something else is responsible for price differentials.

.

[Dave Whitmer]

As you said. drcampbell, the euro standard WILL BE 10 ppm but today it IS 50ppm.

50 ppm is the same as 2006 low sulfur diesel. The euros use 50 ppm diesel and it costs less than RUG.

The US uses 15 ppm diesel and it costs substantially more than RUG.

If I had set out to deliberately wreck use of diesels in the US, I don't think I could improve on the effects of ULSD/Tier II. Make the fuel a buck a gallon higher in price than gasline. Require so much equipment that diesel vehicles will cost $10,000 more than equivalent gas pigs. Rob them of their efficiency to the point the diesel cannot get any better MPG than a gas pig. Did I leave anything out?

Oh yeah, I did. Ban diesel sales altogether in California.

[DieselFan]

Originally Posted by DirtFarmer

Hey Dave-

On the Glenn Beck radio program a week or so ago Glenn interviewed a former (until recently) president/CEO of a US oil company and asked a question about this. The oil exec stated that it is easier to charge more for diesel and jet-A than gasoline since those fuels are purchased more by companies and less by individuals. He said that they are taking extra high profits on the first two to "subsidize" a (relatively) lower profit margin on gasoline.

That said, I'm sure that the ULSD costs more to produce and does add to the cost.

And most companies recover the lion's share of that additional cost through fuel subsidies they charge their customers. That's why you don't hear a lot of them howling about high fuel costs.

FWIW, Shell Jet-A at our local airport is $6.50 and AvGas is $5.25 per gallon.

[Packard8]

Originally Posted by DirtFarmer

Hey Dave-

On the Glenn Beck radio program a week or so ago Glenn interviewed a former (until recently) president/CEO of a US oil company and asked a question about this. The oil exec stated that it is easier to charge more for diesel and jet-A than gasoline since those fuels are purchased more by companies and less by individuals. He said that they are taking extra high profits on the first two to "subsidize" a (relatively) lower profit margin on gasoline.

That said, I'm sure that the ULSD costs more to produce and does add to the cost.

They charge more precisely because they can..........

Most folks operating gas powered vehicles have the option of driving less, walking more, taking public transportation etc. (recently I've put more miles on my bicycle than my car or truck). However, the guy operating a bulldozer, tug boat, farm tractor, class 8 OTR truck etc doesn't have that option...diesel is more of a commercial commodity and unfortunately, those who use it have to "shut up and pay".

[drcampbell]

Originally Posted by Dave Whitmer

As you said. drcampbell, the euro standard WILL BE 10 ppm but today it IS 50ppm.
50 ppm is the same as 2006 low sulfur diesel. The euros use 50 ppm diesel and it costs less than RUG.
The US uses 15 ppm diesel and it costs substantially more than RUG.
...
Ban diesel sales altogether in California.

The European standard will be 10 ppm in 2009 - that's fourteen weeks from now. If the refineries haven't already completed installation and startup of 10 ppm processing equipment by now, they're certainly scrambling to do so, and they have most certainly have budgeted for it (and adjusted the price accordingly) by now.

US pre-2006 LSD is 500, not 50, ppm. I doubt there's any cost difference between 50 ppm and 15 ppm Diesel fuel unless you're aware of a sub-50-ppm base stock which wouldn't require the sulfur removal step.

Nobody "banned" Diesel engines in California. The California ARB set emission standards and the manufacturers opted to meet them only with medium and heavy-duty trucks & buses.

Don't forget that the bulk of today's emissions standards are the result of a 1998 consent decree which many of the largest Diesel engine manufacturers voluntarily signed onto.

[Greasy_Dually]

Now that the standards are the same, why sell diesel in the States for 5 bucks when it'll fetch ten in some European countries?

[BigDaddyT]

Originally Posted by Packard8

(recently I've put more miles on my bicycle than my car or truck). those who use it have to "shut up and pay".

I put a 33cc subaru engine on my bike. It gets about 120 mpg.

[checkthisout]

Originally Posted by Greasy_Dually

Now that the standards are the same, why sell diesel in the States for 5 bucks when it'll fetch ten in some European countries?

The difference is the taxes, not the base cost for the fuel.