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Old 08-18-2006, 07:35 AM   #1
dsprik
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$45-$50/bbl for Oil???

For those depressed over the "no end in sight" for rising fuel prices, this just might make your day a little brighter... CNN article (August 18 2006: 11:10 AM EDT):



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Old 08-18-2006, 08:59 AM   #2
rickety
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Keep in mind that diesel prices are still up and expected to stay that way. Production of diesel is not given the priority that other fuels in the "stack" are. Diesel prices according to the news last night are expected to rise to as much as 3.50+ per gallon. Here in the little town that I live in Chevron is pricing it at $3.62, Union at 3.39, and Safeway is at 3.39 with 3 cents off for club memebers and ten cents gallon off with a $50 groceries purchase.

Isn't it nice the way we are geting manipulated by the government, big business, and the oil companies?

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Old 08-18-2006, 09:11 AM   #3
tweir
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$3.17 per gallon this morning. Chevron @ Hwy 78 & Rancho Santa Fe. Rd. San Marcos, CA.

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Old 08-18-2006, 11:49 AM   #4
Charlie
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Sounds like now is the time to unload the energy stocks.

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Old 08-18-2006, 12:16 PM   #5
Rescue 1
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Wow I guess I shouldn't complain about $2.95 for diesel. Although we now have gasoline for $2.63 per gallon...

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Old 08-18-2006, 02:48 PM   #6
Cat320
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Pretty soon that stuff will be as expensive as bottled water!
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Old 08-18-2006, 08:30 PM   #7
MAMalody
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Diesel at the corner station today was $3.59/gal. My wifes car just drove right past it.

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Old 08-18-2006, 09:09 PM   #8
dsprik
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I made the comment a few years ago, that at least we didn't have to put milk @ $3.00/gal in our gas tanks. Everyone in the car laughed at the joke...

Rick, I agree with you on the diesel priority. The only thing that I am thinking is that as the demand for oil starts dropping, the pressure on diesel production could be significantly reduced, allowing refiners to ramp up on diesel. Trucking associations across the country must be able to put some pressure on the refiners, don't they?

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Old 08-19-2006, 07:12 AM   #9
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Someone correct me if I'm wrong. I understood diesel is produced from the byproducts or leftovers after gasoline production. What is left is refined into diesel/kerosene/heating oil. If that is correct, then the more gasoline produced the more diesel/kerosene/heating oil can be produced. In that case, the priority is not between gasoline and diesel but between diesel, kerosene, and heating oil. That's what they keep telling us when diesel prices go up in the winter, anyhow. Do I misunderstand the process?

My understanding of why diesel is now higher than gasoline when for years it was the other way around is that truckers are now allowed to contract at an anticipated price and can pass any increase along to the receiver of their goods as a surcharge. Thus we don't hear the truck unions screaming like we used to. Just us little guys taking it in the shorts once again.

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Old 08-19-2006, 07:21 AM   #10
8.1al
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Oil for $45-50 a barrell? Now that's something worth dreaming for isn't it? I sure hope they are right. That will probably happen about the time that the auto manufacturers get tooled up for lots & lots of small cars and then everyone will want a truck or suv again

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Old 08-19-2006, 07:51 AM   #11
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OPEC and the rest of the oil producers can and will restrict production just a bit and the prices will stay where they are. With China and India's demands increasing daily, there isn't going to be much of a reduction. Homegrown biofuel is a step in the right direction along with rechargeable hybrid vehicles. Fuel cells would be great (especially in RVs--wouldn't be great not having to hookup our Montanas?), but everyone is dragging their feet in this department.

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Old 08-19-2006, 01:07 PM   #12
dsprik
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I think the last 24 months have started a little bit of a momentum for alternative energy/propulsion systems. I believe that whatever happens to the price of oil, up or down, I don't think you will see this surge in innovative technologies die out like in years past. I believe that some very bright people can smell some very lucrative patents. American Free Enterprise still makes us the greatest country in the world. It will be interesting to see what the next 5 years will bring.

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Old 08-19-2006, 05:34 PM   #13
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Diesel is still cheaper than gas in western Canada. Today. Gas 1.169 per litre for 87 octane
Diesel is only 1.069 per litre. 3.8 litres make a US gal. I pack 365 litres, Do the math. This is one time I sure hope I am wrong but I believe we will never see gas below a dollar a litre in this Country.

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Old 08-19-2006, 07:24 PM   #14
Charlie
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Steve-
You asked about the components of crude oil. Think of it as a tree with the lightest hydrocarbons in the chain at the top.

The upper part of the tree with the lightest being hydrogen, followed by ethane, propane, butane, pentane, and hexane. These are light enough to be liquid only under pressure.

The center part of the tree would be gasoline, naptha, kerosene and diesel.

The bottom part of the tree would be gas oil and residuum.

The first pass in a refinery is through a "crude unit" where the oil is heated and sent through a series of towers known as fractionators. All of the above components are separated and sent to storage of some nature. Only some of the gasoline at this point is marketable, even after it has been passed through a sulfur treating system, mainly because they have to meet specifications and has to be further refined or blended to meet octane requirements.

From the upper part of the tree, the butanes, pentanes and hexanes can be processed through a reactor system and be converted to additional gasoline.

The middle of the tree with the naptha and kerosene is converted mainly into jet fuel with part of the naptha conversion also resulting in more gasoline.

The diesel that came from the first pass in the crude unit is marketable at this point after sulfur removal.

Now for the bottom of the tree... the gas oil and resid is passed through a series of systems that allow some 95% of this to be converted to more gasoline and diesel with the remaining 5% being the consistency of road tar. At this point there is nothing left from the original pass from the crude unit.

In addition to crude processing, there is processing of NGL (Natural Gas Liquids) and about 60% of this is refined into gasoline, with the remainder being propane and butane.

As you can see gasoline and diesel production is not a simple process. As far as the seasonal adjustments that are made within a refinery to either increase gasoline or diesel production, yes they can produce more or less of each item by adjusting the temperatures of the cat crackers, but there is only so much that can be extracted from a barrel of crude, be it gasoline or diesel. As far heating oil, it basically slightly heavier in composition than diesel and this is achieved by how the process is controlled.

There are almost as many different crude oils from all over the world as there are different species of fish in the sea. Each crude oil is different in composition, specific gravity and contain different amounts of gasoline and diesel.

I hope that I have not gone to far in depth on trying to explain what happens in a refinery and this sheds some light on how gasoline and diesel are produced. As far at the prices on the diesel, the single largest contributor to high prices will be the ULSD. It takes lots of equipment, energy, and time to meet the specifications that the Federal Govt. has imposed on the refining industry. True, demand will be an important factor in the cost of diesel and personally I think that diesel will continue to be more expensive than gasoline.

About Dave's link that relates to $40-50/bbl crude oil price, I think the author is being optimistic about the world crude oil situation. I would love to see it as it really hurts to fill up the F-250 after rolling down the road with the Montana attached.



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Old 08-20-2006, 04:41 AM   #15
trukdoc
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Oil production was nearly shut down in this country due to "Environmentalisism" The current president has oil production going like mad here in Texas. Problem is it will take a couple of years to make a difference in pump prices. Think anyone will give credit where credit is due?
Previous leadership sold our oil reserves that were put in place to "Stabilize" the price of oil. The oil reserves worked, It increased the buffer on production as this CNN article refers to. We do not have that advantage anymore.

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Old 08-20-2006, 05:52 AM   #16
texdeano
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Well charlie you sound like you have been around the oil bussiness and know what you are talking about.I also was in refining bussiness for 37 years.I agree that the ULSD is causing some of the spike but I also know that diesel is a much cheaper product to produce than gasoline which has to go through many processes and than the several diferent products have to be blended togeather to meet all of the octane and cvli specs.At the present time some of the refineries are having problems meeting the new sulfur regulations and it is creating a shortage of fuel in some states Colorado being one I know of for sure
Quote:
quote:Originally posted by Charlie

Steve-
You asked about the components of crude oil. Think of it as a tree with the lightest hydrocarbons in the chain at the top.

The upper part of the tree with the lightest being hydrogen, followed by ethane, propane, butane, pentane, and hexane. These are light enough to be liquid only under pressure.

The center part of the tree would be gasoline, naptha, kerosene and diesel.

The bottom part of the tree would be gas oil and residuum.

The first pass in a refinery is through a "crude unit" where the oil is heated and sent through a series of towers known as fractionators. All of the above components are separated and sent to storage of some nature. Only some of the gasoline at this point is marketable, even after it has been passed through a sulfur treating system, mainly because they have to meet specifications and has to be further refined or blended to meet octane requirements.

From the upper part of the tree, the butanes, pentanes and hexanes can be processed through a reactor system and be converted to additional gasoline.

The middle of the tree with the naptha and kerosene is converted mainly into jet fuel with part of the naptha conversion also resulting in more gasoline.

The diesel that came from the first pass in the crude unit is marketable at this point after sulfur removal.

Now for the bottom of the tree... the gas oil and resid is passed through a series of systems that allow some 95% of this to be converted to more gasoline and diesel with the remaining 5% being the consistency of road tar. At this point there is nothing left from the original pass from the crude unit.

In addition to crude processing, there is processing of NGL (Natural Gas Liquids) and about 60% of this is refined into gasoline, with the remainder being propane and butane.

As you can see gasoline and diesel production is not a simple process. As far as the seasonal adjustments that are made within a refinery to either increase gasoline or diesel production, yes they can produce more or less of each item by adjusting the temperatures of the cat crackers, but there is only so much that can be extracted from a barrel of crude, be it gasoline or diesel. As far heating oil, it basically slightly heavier in composition than diesel and this is achieved by how the process is controlled.

There are almost as many different crude oils from all over the world as there are different species of fish in the sea. Each crude oil is different in composition, specific gravity and contain different amounts of gasoline and diesel.

I hope that I have not gone to far in depth on trying to explain what happens in a refinery and this sheds some light on how gasoline and diesel are produced. As far at the prices on the diesel, the single largest contributor to high prices will be the ULSD. It takes lots of equipment, energy, and time to meet the specifications that the Federal Govt. has imposed on the refining industry. True, demand will be an important factor in the cost of diesel and personally I think that diesel will continue to be more expensive than gasoline.

About Dave's link that relates to $40-50/bbl crude oil price, I think the author is being optimistic about the world crude oil situation. I would love to see it as it really hurts to fill up the F-250 after rolling down the road with the Montana attached.



Charlie
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Old 08-20-2006, 11:04 AM   #17
sreigle
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Thank you, Charlie. You obviously understand this process. Tell me, though, is this saying that the when they up production of gasoline it means less diesel? Or is it that making more gasoline would result in more diesel, or could?

I filled up at the Walmart station today. Unleaded dropped from 2.989 to 2.819. Diesel stayed at 3.079. I just don't understand why diesel used to always be less than unleaded but a couple of years ago that reversed, well before ULSD.

See another Montana or Mountaineer on the road? Flash lights twice, it might be one of us!
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Old 08-20-2006, 02:03 PM   #18
Charlie
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Steve-
Yes, your assumption is correct.

At the first stage of processing in a "crude unit" there will only be x amount of gallons of gasoline and x amount gallons of diesel that can be obtained per barrel of crude from the straight run crude processor. There is not much cheating for one product or the other at this level.

The second level of processing is done in a catalytic cracking unit, more commonly known as cat crackers. The feed stock for these units is the gas oil and resid. The operators can control which product they desire for maximum production by temperature adjustments.

Hence, when you have heard that the refineries gear up for gasoline production to offset summer demand, they start running higher temperatures on the cat crackers in early spring, usually about Feb.

Sometime about this time of year the temperatures are lowered to increase the production of the diesel/fuel oil to start building inventory for the winter heating oil demand.

There is another factor involved that the public is not aware of and this is the routine repairs that is done to these units. Usually they are taken off line in the winter months when the demand for gasoline is lower in order to prepare for full operating conditions in the spring for the gasoline runs. Turnaround repair time can be anywhere from 3-5 weeks. A major company will stagger their shut downs between refineries in order to avert a shortage.

I feel the diesel prices will continue to be elevated due to demand as about 85% of the supply is consumed by the commerical and constuction industry and they don't mind passing the cost on to the consumer.

Charlie
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Old 08-20-2006, 03:32 PM   #19
Mudchief
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The biggest user of diesel is the trucking industry. You don't hear them complaining. The reason being our leaders passed the fuel surcharge bill allowing them to pass that cost on to others. Therefore they can keep the cost of diesel up and laugh all the way to the bank. Last week at a KOA camp ground the person next to me was a trucker on vacation. He told me the week before he spent $1,160.00 for diesel but received $980.00 back in fuel surcharges. Therefore diesel will always remain high. And each time you go to the store you will pay more than you did before.

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Old 08-21-2006, 04:52 AM   #20
virgil47
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Charlie,
What a great explanation. Thanks for taking the time. I got everything except USLD. Someone tell me that that is please.

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