Re: Current theories anybody--or facts??


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Posted by Dan Shockley [12.2.142.13] on Wednesday, December 08, 2010 at 10:41:17 :

In Reply to: Re: Current theories anybody--or facts?? posted by Rick [24.127.145.126] on Wednesday, December 08, 2010 at 08:37:19 :

Rick,

That is kind of the answer...

One of the main drivers is that in the 70s, oil refineries produced diesel and gasoline in proportions that left more diesel then demanded which kept prices low. Over time they have increased the production of gasoline relative to diesel which has pushed relative levels of demand to equilibrium.

A second driver is increased demand for diesel. As said above, diesel is more frequently used for passenger transport than years past. For this reason we are using more diesel relative to Gasoline than before. There are also more grades to kerosene, jet fuel, heating oil, etc, that encroach on diesel production in the column.

On the cost side, low sulfur fuels require significantly more energy input to achieve and therefore are much more costly to produce. But, cost of production is only loosely a driver of price - supply and demand drives price (and therefore oil company profits).

Dan



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