Diesel fuel prices: Cracking, Fracking and Biodiesel Brewing

Posted By on December 8, 2012

My kids roll their eyes when I strike up offhanded conversations with strangers in parking lots, gas stations, etc. Take Friday for instance, I saw a guy get out of crackingoilhis new Passat TDI and glanced over to ask how he liked his new diesel. He grinned and exclaimed, “I’m getting 47 mpg!” which I assumed that meant he liked it.
Winking smile
Unfortunately our conversation went down hill from there as talk quickly eroded into the price of fuel … and in particular the premium price he felt he was paying for diesel fuel (over $4.00/gallon while gasoline is currently $3.26). He stated that when he was younger, “diesel was always cheaper than gasoline” and that even in Europe diesel was less expensive than gasoline … so I started my lecture and will summarize below.

The ultra-low sulfur diesel fuels we purchase today are more refined with less sulfur than years ago. This makes them better for the environment and the higher winter cetane rating also help with ignition. Rarely do we see the heavy clouds of smoke and difficult starts as in years gone by … especially in passenger vehicles like the newer Audi, BMW, Mercedes Benz and Volkswagens. Also in the U.S., gasoline get a preferred tax structure with the rationale that larger diesel vehicle damage the roads more and diesel car drivers pay the penalty too. In Europe the opposite exists in order to encourage the more  efficient diesel over the gasoline engine (diesels are up to 35% more efficient … ie. mid-sized VW Passat at 47 mpg). Add to the political factors that we also use fuel oil … a close cousin to ‘diesel’ … in the winter to heat homes therefore making less of the heavier hydrocarbon crude oil available for road use this time of year – it all adds to inching up of the price. In good economic times this could even be more pronounce because oil producers will sell their desirable “ULSD — clean diesel” to the buyers who will pay the most … often overseas.

Here in the U.S. we are trying to offset this demand with new products that don’t use crude oil … or as much of it in the blend, since it do take 25% more crudebiodieselcycle to make a gallon diesel than a gallon of gasoline (remember physics and the laws of thermodynamics – heat, energy, etc … a BTU is a BTU). Those of us recognizing this are advocates for alternatives to petroleum and are hoping farming and industry can offset petroleum demand by adding biodiesel. That industry has stepped up with a variety of feedstock options in order to create a form of diesel fuel made from plant materials and as well as recycled cooking oil. Hopefully we’ll continue to see the newer algae based “grown materials” and that they will prove to be fast growing economical feedstocks. If perfected, this will create an entirely new fuel industry reducing the demand for food-based biodiesel as well as supplement petroleum diesel.

With natural gas being cheap and more plentiful here in the U.S. due to hydraulic fracking, I’m also hoping companies working on synthetic diesel derived from natural gas can be economically viable. Royal Dutch Shell is already producing it overseas and other oil companies could start processing in the next few years as well.

But for now, the price will be set by demand … and tweaked by politicians who are coerced by the energy lobbiests with the most influence – ok, so I’m cynical.

washingtonlobbists

Comments

Desultory - des-uhl-tawr-ee, -tohr-ee

  1. lacking in consistency, constancy, or visible order, disconnected; fitful: desultory conversation.
  2. digressing from or unconnected with the main subject; random: a desultory remark.