Why is Diesel higher??

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Originally Posted by Rmay635703
So.
In our area when gas prices drop diesel tends to stay the same or increases in price, when diesel drops in price gas tends to rise in price.

This behavior correlated perfectly with only 2 exceptions in the last 15 years, with the most recent exception about 3 months ago, where gas was staying the same price but Diesel dropped below $3 for the first time in years.

When I asked I was told that the suppliers set a overall goal on revenue and make up their cut on diesel which is more like fixed demand


And we agree that correlation is very different from causation, right?!?

Otherwise things like the correlations graphed below would need to be taken as true.
Correlation Factors of 0.947091 and 0.992558 respectively.

Just because two thing correlate certainly does not mean that one caused, influenced, or had any impact on the other.

Looking forward to your response!!!


3.png


4.png
 
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Originally Posted by Pelican
The main reason is that diesel is used by commercial trucks, farmers and ships; all these are commercial enterprises and fuel expenses are deductible and the petroleum companies know this and exploit it. No other reason as diesel is cheaper to produce than gas

a few years back diesel was cheaper than gas. I know because my diesel driving friend would brag about it. I don't know jack about refining but I'll bet some of the refiners set up their equipment to rectifiy that and swung too far the other direction.
 
Originally Posted by Imp4
Originally Posted by Rmay635703
So.
In our area when gas prices drop diesel tends to stay the same or increases in price, when diesel drops in price gas tends to rise in price.

This behavior correlated perfectly with only 2 exceptions in the last 15 years, with the most recent exception about 3 months ago, where gas was staying the same price but Diesel dropped below $3 for the first time in years.

When I asked I was told that the suppliers set a overall goal on revenue and make up their cut on diesel which is more like fixed demand


And we agree that correlation is very different from causation

Looking forward to your response!!!


Yes but Can we agree human decisions and manipulation can many times override market behavior?

For example common belief is that winter fuel oil demand increases diesel prices, but in reality January and February are almost always the months with lower diesel costs compared to June / July if you look at the National average and not one specific state.
Aka fuel oil and diesel demand/costs don't correlate as well as we claim.

Further demand has less affect on fuel prices than market expectations and investment almost to the point of being unrelated except under extreme changes,
Prices travel along the fringe of how well expected demand and active capacity correlate.
Aka how well did corporate/investment plan dictates cost more than anything.

We are living in a post classic economics era where the standard reasons given for market behavior are almost always false

Going all the way back to 1994 I find only 4 examples where winter diesel prices are higher than in June/July

Sometimes correlation is the best predictor of future behavior because human involvement in investment is mostly predictable
 
Originally Posted by Rmay635703
We are living in a post classic economics era where the standard reasons given for market behavior are almost always false

Going all the way back to 1994 I find only 4 examples where winter diesel prices are higher than in June/July

Sometimes correlation is the best predictor of future behavior because human involvement in investment is mostly predictable

Ugh, no!!!

When was the last time you read a 10-k, for any company?!?

You're talking all conspiracy like, and it's distasteful.
Please read a few of these and then get back to the group.

National Fuel Gas 10-k

Suburban Propane 10-k

Anadarko 10-k

Northern Oil and Gas 10-k
 
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In 1995 regulations reduced the allowable sulfur content in highway diesel from 5000 wppm maximum to 500 wppm maximum, achievable with moderate pressure reactors and moderate activity catalysts. This does not come for free, as capital investment in additional equipment and operating costs in energy (fuel gas), hydrogen, catalyst, and manpower. About a decade after that regulations reduced the maximum allowable sulfur content in highway diesel from 500 wppm to 15 wppm, quite a step change requiring higher pressure reactors, higher activity and more highly specialized catalysts, significantly more hydrogen, and significant energy cost increases.

Both these changes in regulations disconnected highway diesel pricing from seasonality with home heating oil. Highway diesel does not have near the seasonality of home heating oil, and with increased demands fore more consumer goods and wider availability of consumer goods, is dominated by the trucking industry, not the typical US residential motorist demands that gasoline has, plus global demand for diesel has been historically higher outside the US than gasoline, causing further disconnect from seasonal effects. Further regulations on sulfur content of fuel burned by ships within certain distances of some shores has further increased global diesel demand for marine use whether a freighter or a cruise ship.

At least one board member has advocated the US adopt the Venezuelan model of a single national oil company and subsidized pricing; I do not. Empirical examples of such false economies have never wotked out throughout history, but everyone has the right to their own opinion. Can any of you say you'd like for the US to become a society where your employment is dependant on which political candidate you vote for?
 
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Originally Posted by racin4ds
Good info, thanks all. Certainly sheds some light on things.

Yes, despite you living in Florida, you're still getting dinged for home heating.
wink.gif
The price of diesel is often cheaper than gas here in the summer, sometimes not, but the diesel will almost always, over the last many years, creep above gas over the winter. Now, in the 1970s and 1980s, that wasn't the case.
 
Originally Posted by Imp4
Originally Posted by Rmay635703
We are living in a post classic economics era where the standard reasons given for market behavior are almost always false

Going all the way back to 1994 I find only 4 examples where winter diesel prices are higher than in June/July

Sometimes correlation is the best predictor of future behavior because human involvement in investment is mostly predictable

Ugh, no!!!

When was the last time you read a 10-k, for any company?!?

You're talking all conspiracy like, and it's distasteful.
Please read a few of these and then get back to the group.

National Fuel Gas 10-k

Suburban Propane 10-k

Anadarko 10-k

Northern Oil and Gas 10-k

agree. Why is it human nature to assume a conspiracy over simple supply and demand. I realize back in the day, Standard Oil had all the market and DID manipulate. But that was like 80 years ago. Oil is too fragmented (except maybe OPEC) to be manipulated. Are there periods where the commodities traders make it more expensive? Yes. But as often as they do that, it also swings the other way too. I know as I have spent the last 40 years studying and following the oil market closely. Money is made and lost both ways.
 
Another reason for the price disconnect in the winter is that winter gasoline is made from cheaper ingredients that have been stocked up during the summer while diesel is the same for the most part.
 
True that winter gasoline volatility requirements allow significantly more high volatility ingredients such as normal butane, opposite of the warmer months when excess normal butane is sent to storage. This was also the case when all US diesel had one simple maximum sufur specification of 5000 wppm.

Such seasonality typically directs sending streams such as heavy FCCU naphtha and heavy coker naphtha to the gasoline blending pool in the summer and the distillate blending pool in the winter.
 
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