The Finch Formerly Known As Gold

3 September 2005

Warm up the glow plugs

Whatever the difficulties with refining capacity may be, they don't seem to have had quite as much effect on diesel fuel; #2 diesel, which at the beginning of the summer was about twenty cents pricier than regular unleaded, is now about twenty cents cheaper. I didn't see any diesel today priced at more than $2.90, while 87-octane gas at most places is in the general vicinity of $3.10.

The simplest explanation is that the stations don't sell as much diesel, and therefore they're still running on price trends from a week or so ago, but this seems a bit unlikely, especially since truck stops sell plenty of diesel and they're not, for the moment, more expensive. Could it be that most of the refineries that produce diesel, at least for this area, were not located along the coast and therefore didn't suffer storm damage?

I'm guessing that this isn't enough of a price shift to motivate people to go buy diesel-powered cars — it certainly wouldn't be for me — but these days, anything seems possible.

Posted at 4:55 PM to Family Joules

TrackBack: 10:09 PM, 3 September 2005
» One Wonders … from Engine of the Future
Dustbury wonders why, since the beginning of summer, the price for diesel fuel went from roughly 20 cents higher than gasoline, to 20 cents below. That got me wondering, so I looked. While I suspected as much, this seems to indicate that there are tw......[read more]

Well, IANAOT (I am not an oil tycoon), but I think the price discrepancy during these shocks may have something to do with the refinement efficiency … and the refineries being able to run larger batches.

With gasoline, you have all the different blends. From what I’m gathering, there are basically two types of diesel – Highway and off-road. Right now, the difference has to do with the sulfur content, and they’re looking to combine those requirements. To top that off, it actually looks like those diesel regs are not yet fully implemented.

Basically, diesel can be refined in large, efficient batches … which is what we can do with gasoline if they’ll waive the regs (past Sept. 15).

Posted by: Mel at 9:32 PM on 3 September 2005

I've noticed long since that the price of diesel is far less volatile than that of gasoline (not unlike the substances themselves). Demand for diesel is more driven by the larger economy because -- efforts to get people driving diesel-fueled cars and trucks notwithstanding -- it's basically an industrial fuel (18-wheelers, but also railroad locomotives, river tugs and cargo ships) rather than a consumer fuel.

It takes a lot to make demand for diesel soften enough to see the price drop, while gasoline prices fluctuate quite a bit and -- before Katrina hit -- gasoline prices here in west Georgia were in the process of subsiding rather nicely from the neighborhood of $2.70, so that until yesterday I was using gas bought at $2.499 just before landfall.

Posted by: McGehee at 10:15 AM on 4 September 2005

Conversely, there is probably less upward pressure on the demand curve for the same reasons. I've been looking at some of the price differentials over the past couple of years, and they seem to support this premise: demand for diesel is less elastic than demand for gasoline.

How this relates to heating oil, I have yet to determine. Then again, no one uses it out here.

Posted by: CGHill at 10:20 AM on 4 September 2005

Re: diesel cars, something happened between the time back in the early 80s when I had a diesel Rabbit (as awkward a name as ever there was) and today.

My 1980 Rabbit got an honest 50 mpg combined city/hwy. It also rattled your teeth and wouldn't start on cold winter days. We are looking for a new car and I was disappointed to see that the diesel Jeep Liberty gets an estimated 21/26 mpg. Granted, it is heavier and driving 4 wheels. It's also a turbo. But that seems not much better than a conventioanl RAV4 or CR-V.

The Ford Escape hybrid rules the small SUV roost at 31/33 mpg, but you pay through the nose for the engine. (Assuming your nose will hold approx. $4,000).

Posted by: The Prop at 2:42 PM on 4 September 2005