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Old 04-03-2012, 09:37 AM   #1
RWP
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Price of Gas v Diesel

I find an anomoly in the retail prices of gasoline and diesel fuel that I cannot understand. In my area, unleaded regular is around $3.89 at the pump, diesel is $4.15. Yet as of this morning (3 April), gasoline is trading at $3.38 on the New York Mercantile Exchange and heating oil (essentially the same product as diesel) is $3.25. In other words, diesel is 13 cents per gallon less on the wholesale market than gasoline; yet by the time we reach the retail pump, the situation is reversed: diesel is 26 cents per gallon more than gasoline! If you were to assume 75 cents per gallon difference between wholesale and retail to accommodate taxes, transportation, and profit, that could put retail gas at $4.13 and retail diesel at $4.00. I can guess that the added refinery cost of bringing down the sulfur content of heating oil may be part of the reason for the retail discrepancy -- but is there someone more knowledgable about either commodity trading or oil refining who can offer a better answer?
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Old 04-03-2012, 09:42 AM   #2
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The prices of fuel in any form has become a scam game where they never let the truth
get in the way of their shell game.
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Old 04-03-2012, 09:54 AM   #3
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Quote:
Originally Posted by RWP View Post
I find an anomoly in the retail prices of gasoline and diesel fuel that I cannot understand. In my area, unleaded regular is around $3.89 at the pump, diesel is $4.15. Yet as of this morning (3 April), gasoline is trading at $3.38 on the New York Mercantile Exchange and heating oil (essentially the same product as diesel) is $3.25. In other words, diesel is 13 cents per gallon less on the wholesale market than gasoline; yet by the time we reach the retail pump, the situation is reversed: diesel is 26 cents per gallon more than gasoline! If you were to assume 75 cents per gallon difference between wholesale and retail to accommodate taxes, transportation, and profit, that could put retail gas at $4.13 and retail diesel at $4.00. I can guess that the added refinery cost of bringing down the sulfur content of heating oil may be part of the reason for the retail discrepancy -- but is there someone more knowledgable about either commodity trading or oil refining who can offer a better answer?
You also need to consider local and state tax impact. Within a couple blocks of me (South Florida at the moment) are two different cites / counties - 2 stations across the street (and city and county line) from each other have prices that are 5-9 cents different.

Guess where I buy fuel?
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Old 04-03-2012, 09:58 AM   #4
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It was explained to me a few years ago that diesel was a by product of gas hence the lower price, then when diesel became higher I was told that they came up with more efficiant processing and were able to extract more gas from the so called by product of diesel, so cost of diesel was more, and i thought i was somewhat intelligent, guess not
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Old 04-03-2012, 09:58 AM   #5
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Diesel is taxed more heavily at the Federal level. Many states tax diesel more heavily as well. The reasons for this are manifold - perceived road damage by heavier diesel vehicles, discouraging use of diesel because of perceived "dirtier" emissions, etc.

Also, heating oil doesn't have to meet the ULSD 15ppm sulfur requirement yet - thus, diesel fuel is more expensive to refine than non-ULSD home heating oil.

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Old 04-03-2012, 10:04 AM   #6
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Dan is correct but I know of three stations owned by the same company that are about
3 to 4 miles apart and any given day their prices are different. Their con statement is
the prices are set by neighborhood pricing, code for sell it for as much as they can
at that location and still be able to sell it.
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Old 04-03-2012, 10:07 AM   #7
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Quote:
Originally Posted by wb7auk View Post
Dan is correct but I know of three stations owned by the same company that are about
3 to 4 miles apart and any given day their prices are different. Their con statement is
the prices are set by neighborhood pricing, code for sell it for as much as they can
at that location and still be able to sell it.
How exactly does that differ from what, let's say, grocery stores do? Does Kroger look at Safeway's pricing in a given area? You bet they do. It's called a free market. The alternatives are NOT pain-free.

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Old 04-03-2012, 10:24 AM   #8
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I think Rusty nailed it. A little research shows the federal tax on diesel is about 6 cents per gallon more than on gasoline...most states also tack on at least an extra six cents for diesel, too. I should have figured politics was a bigger factor than economics!

Thanks for the observations.
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Old 04-03-2012, 10:34 AM   #9
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Call it what you want the bottom line is the general public is the one being taken.
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Old 04-03-2012, 10:41 AM   #10
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Diesel, no matter what you're told is still a by product of Gas. If they found a way to refine it more to get more gas, why would that effect diesel prices. What I've found out is most of our diesel goes to europe as they have mostly diesel vehicles because of MPG. The kicker is, they have NO refineries of there own. Goes back to supply and demand. we have the supply and they demand it. Which in turn makes our fuel more.
Fuel tax is mute in pricing. In wisconsin our diesel tax is 57cents a gallon, and Iowa is less than 30 cents a gallon. When we left home for vacation, disel in Ia was less than 5 cents cheaper than Wisconsin. Stations compete with others, but until the consumers start complaining more, the prices will continue to soar.
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Old 04-03-2012, 10:41 AM   #11
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Call it what you want the bottom line is the general public is the one being taken.
So, what would you propose doing about it?

Rusty
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Old 04-03-2012, 10:47 AM   #12
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Quote:
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Diesel, no matter what you're told is still a by product of Gas.
No, both are distillates from crude oil.

Quote:
Originally Posted by shardan1 View Post
What I've found out is most of our diesel goes to europe as they have mostly diesel vehicles because of MPG. The kicker is, they have NO refineries of there own.
A listing of European refineries may be found HERE.

Tankers leave the Gulf Coast refineries every day loaded with diesel bound for Europe. They return with gasoline from the European refiners. Supplies of the respective fuels go where the market demands exist for them. It's a global marketplace.


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Old 04-03-2012, 06:18 PM   #13
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http://www.eia.gov/pub/oil_gas/petro.../aacsummit.pdf
Is the 1/2011 report that explains the exports of at the time 250k gasoline and 600k diesel and the percentage of distillates.
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Old 04-03-2012, 07:46 PM   #14
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I heard most of the increase is from the exploding demand in China, and that snowball is just starting to pick up downhill speed. The number of cars added to their highways every year is huge!
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