So what is your take on diesel fuel prices after 2020?

[ShinerBock]

For those that do not know, a few years ago the International Maritime Organization made a significant regulation that will have a big impact on everyone's wallet, especially diesel vehicles owners. They set a new standard for sulfur content in ship diesel fuel that they allow at their ports to .5%S by January 1, 2020. That is a significant drop from the current limit. While this will have an impact on everyone's wallet because this new fuel will be more costlier than current fuel used(which will increase prices on everyday goods), it may end up hurting or helping diesel owners according to some analyst.

Many here may remember when the EPA set the ULSD standard and how it effected diesel prices due to the extra refining and purification needed, and causing "sweet" crude prices to increase even more. For years, on land diesel owners alone had to pay the added cost for all of the added refining equipment and processes since the low sulfur fuel was only for them. Diesel fuel refiners also switched to using more "sweet" crude (that was only previously used to make gasoline) due to its lower sulfur content versus less expensive "sour" crude it used before causing the demand(and price) for "sweet" crude to increase.

There are people on both sides of this argument. Some are saying it will cause both diesel and gas prices to skyrocket because it would cause the demand for "sweet" crude to increase even higher. Others are saying that it will cause on road diesel prices to go down because now shipping will also be paying for the added refining processes spreading out the cost for the added piping and other equipment needing to purify "sour" crude.

What is your take on it?

[ktmrfs]

jerem0621 wrote:

Edd505 wrote:
Here's my question, why is #2 more than regular gas when there is less refining?

The law of scarcity

mfg cost is not the driving cost for selling price for most anything. It's what the market will bear and pricing for maximum (pick your choice) volume, profit etc.

AND remember the federal fuel tax on diesel is higher than gasoline bya few cents. And the same for some state fuel taxes.

[RAS43]

jerem0621 wrote:

Edd505 wrote:
Here's my question, why is #2 more than regular gas when there is less refining?

The law of scarcity

No longer is there less refining since the requirement for low sulfur fuel in the early 2000's.
And demand is higher from commercial vehicles and trains- more freight to haul.

[jerem0621]

Edd505 wrote:
Here's my question, why is #2 more than regular gas when there is less refining?

The law of scarcity

[Edd505]

Here's my question, why is #2 more than regular gas when there is less refining?

[colliehauler]

Huntindog wrote:
Here is the deal: If I buy another diesel, the prices will skyrocket. And that is the closest to a sure thing that there is in this world.

I hear you, Diesel was always cheaper then gas until 2004, the year I bought my first Diesel truck.

[Huntindog]

Here is the deal: If I buy another diesel, the prices will skyrocket. And that is the closest to a sure thing that there is in this world.

[Groover]

Here is the type of thing that I expect to help keep the price of diesel fuel under control: https://mobile-reuters-com.cdn.ampproject.org/v/s/mobile.reuters.com/article/amp/idUSKCN1LT0NQ?amp_js_v=a2&amp_gsa=1#amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.reuters.com%2Farticle%2Fus-china-pollution-diesel%2Fchina-drawing-up-plans-to-take-polluting-diesel-trucks-off-the-road-source-idUSKCN1LT0NQ

For those that don't want to take the time to read the article China wants to replace diesel driven trucks with other types and has a goal of reducing diesel consumption by 20 million metric tons per year. They expect the project to commence by 2020 but don't give a target completion date. All the same, the direction is clear and I am sure that the same sort of thing will be happening in other countries, it is already happening here.

[Ralph_Cramden]

You ought to see this madhouse in Western Pa, NY, WV,Ohio. More natural gas under my Arse than they know in the Marcellus, and below that the Utica. Pipelines going in everywhere, at least 2, billion dollar ethane cracking facilites going in, fracking water and other trucks everywhere. Need a cdl driver? Good luck.

Columbia gas just petitioned the PA PUC for a 10% residential rate increase LOL.

[ShinerBock]

DirtyOil wrote:


looks like more of a distribution issue then a refining issue along with poor execution of the process.

According to the EPA and EIA, the extra hydrotreating process added another 5-7 cents. Some of this was due to the added time it takes, but most was to recoup the billions spent on revamping their facility or building a new refinery as was stated in the article. This is just part of the refinery process because you can't refine fuel without a refinery.

Also, if you read what is stated, the distribution losses are mainly from pumping ULSD through pipes and into tanks that previously had LSD contaminating with higher than allowed sulfur content. Therefore they had to sell it as a higher sulfur content fuel at a loss. This was to be expected since it would be much more costlier to replace every pipe and every tank at a refinery.

Then there was losses due the special transport needs of ULSD versus LSD due to its higher affinity to water which caused accelerated tank corrosion. They added additives (which also increased cost) to combat this, but it does not completely solve the issue.

[DirtyOil]

ShinerBock wrote:
Well I guess the US Energy Information Administration just doesn't know what they are talking about.


"Refiners revamped (retrofitted) existing refinery units to produce ULSD, representing two-thirds of highway diesel production, and thatthe remaining refineries built new units. The capital cost of revamping is assumed to be 50 percent of the cost of adding a new unit.

The amount of ULSD downgraded to a lower value product because of sulfur contamination in the distribution system is assumed to be 7.8 percent at the start of the program, declining to 2.2 percent at full implementation. The decline reflects the expectation that the distribution system will become more efficient at handling ULSD with experience.

A revenue loss is assumed to occur when a portion of ULSD that is put into the distribution system is contaminated and must be sold as a lower-value product. The amount of the revenue loss is estimated offline based on earlier NEMS results and is included in the AEO2012 ULSD price projections as a distribution cost. The revenue loss associated with the 7.8 percent downgrade assumption for 2009 is 0.7 cents per gallon. The revenue loss estimate declines to 0.2 cents per gallon after 2010 to reflect the assumed decline to 2.2 percent.

The capital and operating costs associated with ULSD distribution are based on assumptions used by the EPA in the Regulatory Impact Analysis (RIA) of the rule 9. Capital costs of 0.7 cent per gallon are assumed for additional storage tanks needed to handle ULSD during the transition period. These capital expenditures have been fully amortized by 2011. Additional operating costs for distribution of highway diesel of 0.2 cent per gallon are assumed over the entire projection period. Another 0.2-cent cost per gallon is assumed for lubricity additives. Lubricity additives are needed to compensate for the reduction of aromatics and high-molecular-weight hydrocarbons stripped away by the severe hydrotreating used in the desulphurization process."


US EIA Petroleum Market Module

From articles I have read, it cost over $8 billion to revamp the refineries to make ULSD.

looks like more of a distribution issue then a refining issue along with poor execution of the process.

[ShinerBock]

Well I guess the US Energy Information Administration just doesn't know what they are talking about.


"Refiners revamped (retrofitted) existing refinery units to produce ULSD, representing two-thirds of highway diesel production, and thatthe remaining refineries built new units. The capital cost of revamping is assumed to be 50 percent of the cost of adding a new unit.

The amount of ULSD downgraded to a lower value product because of sulfur contamination in the distribution system is assumed to be 7.8 percent at the start of the program, declining to 2.2 percent at full implementation. The decline reflects the expectation that the distribution system will become more efficient at handling ULSD with experience.

A revenue loss is assumed to occur when a portion of ULSD that is put into the distribution system is contaminated and must be sold as a lower-value product. The amount of the revenue loss is estimated offline based on earlier NEMS results and is included in the AEO2012 ULSD price projections as a distribution cost. The revenue loss associated with the 7.8 percent downgrade assumption for 2009 is 0.7 cents per gallon. The revenue loss estimate declines to 0.2 cents per gallon after 2010 to reflect the assumed decline to 2.2 percent.

The capital and operating costs associated with ULSD distribution are based on assumptions used by the EPA in the Regulatory Impact Analysis (RIA) of the rule 9. Capital costs of 0.7 cent per gallon are assumed for additional storage tanks needed to handle ULSD during the transition period. These capital expenditures have been fully amortized by 2011. Additional operating costs for distribution of highway diesel of 0.2 cent per gallon are assumed over the entire projection period. Another 0.2-cent cost per gallon is assumed for lubricity additives. Lubricity additives are needed to compensate for the reduction of aromatics and high-molecular-weight hydrocarbons stripped away by the severe hydrotreating used in the desulphurization process."


US EIA Petroleum Market Module

From articles I have read, it cost over $8 billion to revamp the refineries to make ULSD.

[DirtyOil]

Being in the petroleum business for 38 years, I've learned a few things. Hydrodesulfurization has been used since the fifties, to remove sulphur, not a new process. Invented in late 1800s, it has been redeveloped/redesigned/upgraded since, to improve octane ratings in naphtha (gasoline), by removing/reducing sulphur in the feed stock.
The price per gallon, liter, bbl or m3 has more to do with supply and demand, less to do with the production/processing.

[ShinerBock]

DirtyOil wrote:



And as I stated... Canada and the US are years ahead of the so called "Global limits" our ECA has had limits set at 1000ppm, for several years now! No reason why we can't have ULSD across the board, for both on/off road, rail/marine and globally... process is there. Processors just need a kick in the rear and get their heads out of the sand.

I stated that because a few people that posted before that stated their area already has low sulfur diesel. I was making the point that these areas are not as big of a fuel demand as the 2020 regulation.

Although, the US EIA study on the cost per gallon increase when we switched to ULSD due to the desulfurization infrastructure needed at the refineries, The added cost of the desulfurization itself, the waste of having to sell new product at a lower value due to contamination with older higher sulfur product(especially in the first several years), the added distribution storage required due to the special needs of ULSD, and the lubricity additives needed to compensate for the reduction of aromatics and high-molecular-weight hydrocarbons stripped away by the severe hydrotreating used in the desulphurization process. It was a very interesting study.


All in all it increased the cost of diesel fuel since 2006 and will likely cause the cost of many products transported by these ships to increase which will be trickled down to the consumer. Then there is the aspect that it might increase the demand for sweet crude just like ULSD did, but that may not have that much of an impact these days. These added cost will probably decrease over time when the initial capital invested and value lost during the first few years due to contamination is regained like with current USLD, but that may take a while.

[DirtyOil]

ShinerBock wrote:
As I stated before, the current low sulfur fuel used in local US and EU waters, or Emission Control Area's(ECA) as they are called, effects a much smaller amount of marine fuel demand than the new 2020 regulation will.


IMO 2020:
What’s next?

Shell wrote:
The transition to 0.5%S will cause more changes to global marine industry than the switch to the 0.1%S fuel in the ECAs. The impact of this transition represents approximately 75% of global marine fuel demand when compared to the demand of ECA.

This article from BP has a better map of current ECA's.

MARPOL 2020 and beyond

And as I stated... Canada and the US are years ahead of the so called "Global limits" our ECA has had limits set at 1000ppm, for several years now! No reason why we can't have ULSD across the board, for both on/off road, rail/marine and globally... process is there. Processors just need a kick in the rear and get their heads out of the sand.

[ShinerBock]

As I stated before, the current low sulfur fuel used in local US and EU waters, or Emission Control Area's(ECA) as they are called, effects a much smaller amount of marine fuel demand than the new 2020 regulation will.


IMO 2020:
What’s next?

Shell wrote:
The transition to 0.5%S will cause more changes to global marine industry than the switch to the 0.1%S fuel in the ECAs. The impact of this transition represents approximately 75% of global marine fuel demand when compared to the demand of ECA.

This article from BP has a better map of current ECA's.

MARPOL 2020 and beyond