Tag Archives: petroleum

Business/Economics, U.S.

What Economic Recovery? East vs West? Gas & Diesel prices shooting up! It ain’t the oil prices! Supply is up, demand is down or are they? California refineries going down, again!

Reports out of Los Angeles, California, gasoline prices more than $4.00 USD per gallon (more than $1.00 per liter).   A 23 cents jump in one week!

In the southeastern Idaho city of Pocatello, gasoline prices have gone up about 25 cents in the past two weeks.  Prices for the more efficient Diesel fuel are about to break the $4.00 mark, but are actually unchanged for the past two weeks.

Once again we can’t blame U.S. oil prices, they’re still under $100 per barrel.

The last time I looked into seemingly unexplained fuel price increases it turned out it was a matter of fuel refined in the western half of the country being shipped off to the more populous eastern half to take up the slack caused by their fuel shortage.

The result was fuel prices stayed lower in the eastern half of the country, but went up for us westerners because our supplies went down! (in the case of California, they had too many refineries down, and their fuel laws make it almost impossible to import refined fuels from out of state)

According to the latest data from the U.S. Energy Information Agency (USEIA) total weekly refined gasoline (Total Motor Gasoline) stockpiles, for the whole country, are up from December, by about ten thousand barrels!  As well, total weekly stockpiles of DSO (Diesel) are up from December, by more than 10,000 barrels!

Aw, let’s break it down into the separate Petroleum Administration for Defense Districts (PADD).

I checked PADD 4 (aka Rocky Mountain PADD, serves my area) and discovered that Total Motor Gasoline weekly stockpiles are down from December by 570 barrels.  Distillate Fuel Oil (DSO/Diesel) stockpiles down by 143 barrels.  So supply has gone down for the Rocky Mountain area.

PADD 5 (West Coast) shows an increase in weekly stockpiles for both gasoline and Diesel.

PADD 3 (Gulf [of Mexico] Coast) also shows an increase in stockpiles of gas and Diesel.  The same for PADD 2 (Midwest), as well as PADD 1 (East Coast).

Is a decrease in stockpiles in PADD 4 the cause of price increases across the country, while all other PADDs show increases in stockpiles?

Is it demand?  According to a recent report out of California, demand for fuel was down (again) for the third quarter of 2012. That claim is based on California fuel tax collections.

However, the USEIA says overall demand for gasoline, across the country, is up from the same time last year.  For 27 January 2012 demand was at 8.018 million barrels per day (MBpD).  As of 25 January 2013 demand was at 8.501 MBpD.  When you’re talking about MBpD that nearly 0.5 increase is a lot.

Now lets look at demand for Diesel.  There should be no reason for Diesel prices to be going up, because the USEIA data shows a slight drop in demand from the same time last year.  On 27 January 2012 demand was at 3.73 MBpD, while data for 25 January 2013 shows demand was at 3.72 MBpD.

So far I can’t find a reason for increasing gas and Diesel prices.  Overall demand is up for gas, but so is overall supply! Diesel prices should be going down, because overall demand is almost unchanged from last year, and overall supply is up from the month prior!  (PADD 4 supply is down, and I couldn’t find any USEIA demand data by PADD)

Regarding PADD 4 area.  Although prices are going up, they’re still considered the lowest on average for the whole United States.

Here’s another possibility for fuel prices going up:  In mid January a lot of U.S. refineries announced they were closing down for maintenance.  Perhaps the price increase is the result of fuel suppliers anticipating the reduced output from shut down refineries?

The following refinery shutdowns were reported back in January by Dow Jones Newswire: Texas City, Texas. Port Arthur, Texas. Borger, Texas. Martinez, California.  Wilmington, California. Los Angeles, California. Carson, California. El Segundo, California. Richmond, California. (remember what I said about California fuel regulations? so many refineries down without being able to ship in more fuel from out-o-state)  Kapolei, Hawaii. Trainer, Pennsylvania.

Warning for Californians: Phillips 66 is considering selling off its two California refineries! They blame increasing regulation by the Golden State, which is driving up the costs of operations. Currently Phillips 66 is the only U.S. oil company with refineries in all 5 PADD areas.  British Petroleum (BP) is also selling off a California refinery, along with the ARCO brand and a refinery in Texas.

 

Business/Economics, International, Opinion, Technology

Government Incompetence: More than 80% of Japan’s nuclear reactors to be shut down, get ready for petroleum & coal prices to spike

Combine natural disasters, corporate and government incompetence, and regular inspections, and you end up with more than 80% of Japan’s nuclear power turned off.  That’s disastrous when you realize that Japan’s industries rely on nuclear power!  Can you say poor planning?

On November 25, another nuke plant will be shut down for regular inspection.  But that’s not all.  The remaining operating nuclear power plants will also be shut down going into spring 2012, because of the timing of scheduled inspections.  That means all 54 Japanese nuke plants will be off line!

This means there will be a huge demand coming from Japan for petroleum (oil, gasoline, diesel), natural gas and coal to run traditional electrical generators.  Now imagine what will happen to the price such commodities when an entire country suddenly starts sucking up millions of barrels of fuel per day!

Business/Economics, Idaho, U.S.

Occupy America! Diesel disparity in Idaho. Gas prices way down, Diesel way up. Blame increase in U.S. exports! Blame pricing games! Warning for California. Fracking really for fuel production. Grow your own!

In eastern  Idaho, the difference between the price of one gallon of regular gasoline, versus diesel, is now a full one dollar.

Phillips 66, next to the Bannock County court house, Pocatello, Idaho

On November 19, the average price, in the Pocatello/Chubbuck area, hit $3.18 per gallon for regular gasoline, and $4.18 for diesel.

The U.S. Energy Information Administration (USEIA) says gas prices are falling, in general, due to the usual seasonal drop in usage.  I’ve never seen it drop by this much, here in eastern Idaho.  Back in May, the average price was $3.65 per gallon, and it stayed that way through most of the summer.  In the past two or three months the price has dropped almost 60 cents.

The USEIA also says regional fuel refining has a lot to do with prices, but back in September I discovered that PADD 4 gasoline production was being kept below demand. The latest data on PADD 4 gas production shows that, after months of keeping it around 290 thousand barrels per day, regional refineries are now pushing out more than 324 thousand barrels per day.  This is why gas prices, in the Rocky Mountain area (PADD 4) are, or should be, dropping.

In California it’s a different story.  The latest gasoline price survey shows the average price around $3.54 per gallon, with many areas paying $3.79.  California taxes are one reason for the higher prices, but the other reason is that California refines its own fuel, and the refineries are in trouble.

According to the USEIA, despite having the third largest refinery industry in the country California’s refineries are maxed out, there’s just too many people driving too many vehicles.  The USEIA is warning of a fuel price catastrophe in California: “California refineries need to be running near full capacity to meet the State’s gasoline demand. If more than one of its refineries experiences operating problems at the same time, California’s gasoline supply may become very tight and prices can soar. Even when supplies can be obtained from some Gulf Coast and foreign refineries, they can take a relatively long time to arrive due to California’s substantial distance from those sources. The farther away the necessary relief supplies are, the higher and longer the price spike will be.”

Regarding the rising cost of diesel fuel, it looks like some of what I warned about back on November 5 is coming true.  Bottom line; around the world diesel production is down, while international demand is going up and up.

The latest reports on diesel commodity prices show a slight decrease.  The decrease is so small that the global increase in demand for diesel will still cause pump prices to go up.

And how does the global demand affect us here in the U.S.?  According to the American Petroleum Institute (API), most diesel fuel produced in the Untied States is actually being exported to other countries (a 37.6% increase, in both diesel and gasoline exports, in the past year).  That means less diesel for the domestic market.

Diesel fuel is part of the “distillates” family of fuels.  In the U.S. ultra low sulfur diesel is referred to as “Distillate Fuel Oil 15 ppm (parts per million) and under of Sulfur”.  According to USEIA records, ultra low sulfur production, in the United States, varies between 3.2 million and 3.6 million barrels per day.  Now realize that international demand has gone up, and that U.S. refineries are exporting much of their diesel.  Since overall production is remaining in the 3 million to 4 million barrels per day rang, that doesn’t leave much for us.  The result is diesel prices will continue to go up, until U.S. distillate refiners greatly increase production.

For those of us in the Rocky Mountain (PADD 4) area, the USEIA shows an up and down pattern for “Distillate Fuel Oil 15 ppm (parts per million) and under of Sulfur”.  From March through May, diesel production was stuck at about 160 thousand barrels per day.  By the end of July it increased to 195 thousand barrels per day.  Since the end of August it’s dropped, to 185 thousand.  That explains why diesel pump prices in the Rocky Mountain area are going up.

But here’s one more reason, and one that many diesel fuel users have speculated on; the high pump prices of diesel is an attempt by producers to make a bigger profit, since they’ve actually been keeping gasoline pump prices artificially low.  A Reuters article states just that: “This in turn crimps diesel output until the cost of the fuel gets high enough to offset losses from additional gasoline sales.”

The Reuters article explains, not very well, that ultra low sulfur refining requires hydrocracking, a process involving hydrogen.  It’s also used for gasoline.  The problem is that many refineries in the U.S. can not produce both diesel and gasoline.  This might explain the swings in production; one month gasoline production up, and diesel down, the next month it’s reversed.

The push for fracking natural gas, is actually for the fuel refining industry, because it turns out that using the hydrogen in natural gas is a good cheap way to conduct hydrocracking in fuel refining.

Eventually more diesel will be produced, because of the global demand.  Several companies in the Gulf Coast area have invested billions of dollars to build new refineries to extract the hydrogen from natural gas to hydrocrack new diesel fuel.

Diesel fuel users should really look into making their own biodiesel, even though you could get into trouble with the Federal and State tax collectors, as well as the EPA.  Here’s some links:  Backwoods Home Official BioDiesel Home BioDiesel Diesel Master JR Whipple (good for moonshine too, remember diesel is a distillate) There plenty more sites on the internet about making your own diesel, do the research.