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Why is diesel fuel price higher than regular gas?
While searching for information on the current cost of diesel fuel at the pump, I found this article which talks about the supply side of the fuel, and in particular as regards refining capacity.
This is a very good overview of the oil industry, and confirms some of the reasons for market conditions being what they are at the retail pump.
Here is a quick snapshot of the situation:
In Canada, we have limited refining capacity for the production of diesel fuel. I believe the number is about 25%, which means one quarter of each barrel of crude becomes distillate (diesel, jet fuel, kerosene). By contrast, the European market has a diesel refining capacity of about 50%.
However, driven by of a growing economy, demand for diesel has increased substantially over the past 10 years. In this regard, we may be seeing some relief in the coming months :’).
The final, and perhaps most important, impact on the current pricing structure for diesel at the pump has been the (temporary) “shut-down” of diesel refining at Suncor, Petro Canada and Imperial Oil operations in Western Canada. These planned and unplanned shut-downs started in late September of this year. As a result, supply has tightened, which has brought about a short-term price premium being added to the cost of diesel fuel at the pump.
A strong future for diesel
The oil industry expects the current price spread between gasoline and diesel to diminish. This will happen as demand drops (fewer transport trucks on the road), refineries come back on-line, and upgrades designed to increase the diesel fuel production are completed at Canadian refineries.
5 Comments
Comments
Great question.
I have no idea.
Maybe someone from the product department at Volkswagen Canada could respond to this?
I’ve asked the question to my friend Robert at Volkswagen, and here’s his answer:
Thank you for visiting tdiurious.ca. We appreciate your interest in the brand.
Various factors determine which model combinations will be offered to the Canadian market. Decisions about engines, options, and special features for various markets are based on established market expertise, and experience with certain models. The actual financial crisis may help speed up introduction of some new models. While these decisions are obviously not what you would have preferred, we are still very flattered by your interest in Volkswagen.
Thanks again for your comments.
Are there areas in Canada and the U.S. where it is hard to find clean diesel fueling stations? And as regards ‘peak oil’, which are we likely to run out of sooner, gasoline or clean diesel fuel?
Karen, great questions. The first is relatively straight forward, your second question we could talk about for years…
On availability of ULSD; in Canada all on-road diesel is ULSD. In the USA the transition to ULSD continues and will be complete thru 2010 however even today it is not a challenge to find the low sulphur variety at retail filling stations.
On ‘peak oil’; running out of liquid crude is a long way off, perhaps 200 years or more. The real issue is the anticipated rise in the cost of petroleum as the supply tightens, the cost of extraction (due to more elaborate technology for the purpose of pulling more from old fields and deeper pools)continues to increase and the true cost of the carbon footprint is accounted for. However the stone age did not end due to a lack of stones…
In the end a barrel of crude can be refined into a predetermined mix of gasoline and distillates (keorsene, jet fuel, diesel). It is the refining capacity of a region/nation that determines the final mix of refined fuels. Europe produces more diesel than North American refiners because they have more distillate refining capacity. In NA we refine a higher proportion of crude into gasoline.
So to answer your question, we will run out of both at the same time somewhere around the year 2200. However I am hopeful we are now entering a period of energy infrastructure change which will usher in the era of clean renewable and alternative energy sources.
Thanks for the interest.
Andrew
November 15, 2008 by herbie
I would like to know when you are planning to bring back the smaller diesel models at the more affordable price