I Found The Reason - Diesel Truck Forum - TheDieselGarage.com
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post #1 of 18 (permalink) Old 03-13-2008, 12:15 AM Thread Starter
 
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I Found The Reason

…for the fact that diesel costs substantially more than gasoline.

ULSD regulations.

Thanks to EPA regs, all middle distillates (No.1 (aka kerosene), No. 2, Jet A, JP-8, etc) have to meet the 25 ppm standard for sulfur.

The common means of getting sulfur out of oil is to run it through a hydrodesulfurization process aka the Klaus Train. Hydrogen is bubbled through the oil under conditions favoring the sulfur reacting with the hydrogen to make hydrogen sulfide. An amine removes the hydrogen sulfide and a recycling process removes the sulfur out as yellow powder which is sold. Each pass through the Klaus Train removes about 90% of the sulfur.

Back in the 80s, crude was passed through the Klaus Train once to remove sulfur. Super-sour crude (such as from Venezuela) got run through twice. That resulted in a No. 2 with 5,000 ppm sulfur. Then the low-sulfur requirements of the early 90s came along and that forced the refiners to run refined No.2 through the Klaus Train again. This was uncharted territory running product through the Klaus Train and it resulted in a big change in the properties of diesel fuel. A lot of diesels had all their rubber goods attacked by the low sulfur diesel. Mine cost me $700 to fix. At any rate, this resulted in a No. 2 diesel fuel with <500 ppm sulfur. To get the product down more than another order of magnitude, the refineries have to run the middle distillates through the Klaus Train TWICE more. A total of four passes.

The Klaus Train has become one busy process. Thanks to other EPA regs (New Source Review, 40 CFR 60, 40 CFR 61, and 40 CFR 63) nobody has built a new Klaus Train since Jimmy Carter was President.

Houston, we have a bottleneck.

Only so much middle distillate can be forced through, so the supply is short enough to force up the price, well above that of gasoline which does not require this ultra low level of sulfur.

Good ol’ EPA. Done it to us again.
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post #2 of 18 (permalink) Old 03-13-2008, 05:10 AM
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So why is diesel 40% the cost of gasoline in europe and asia? Are their refineries that advanced? I'm throwing the B.S. flag on this one.



:believe
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post #3 of 18 (permalink) Old 03-13-2008, 11:25 AM
 
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Quote:
Originally Posted by mckey73
So why is diesel 40% the cost of gasoline in europe and asia? Are their refineries that advanced? I'm throwing the B.S. flag on this one.



:believe

What he said.
Plus there is still furnace oil in the picture as well. Refineries can adjust to make more diesel or gas. That sour crude from Venezuela and our Canadian tar sands are refined in Texas, as they are best suited for that stuff. Diesel will be always cheaper to refine than gas. I just think the refiners didn't made enuff of fuel in a whole (everything combined) because they were not making any money the past few months due to the high crude prices. So they imported more gasoline instead. Kept the gas prices down some, plus a few folks feeling the pinch and trying to conserve gas. Everyone needs Diesel themself, none got to be imported, not enough was made, suplies are shrinking, Diesel goes up.
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post #4 of 18 (permalink) Old 03-13-2008, 11:33 AM
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Dave - didn't you put this same post up on TDS almost a year ago? :shrug:

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post #5 of 18 (permalink) Old 03-13-2008, 02:18 PM
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Didn't diesel go higher than unleaded a few years before the ULSD came out?

I remember paying less for diesel than unleaded all through the 80' & 90's and into about 2000. Then it crept up past unleaded. Now it's 25 cents more than premium unleaded.
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post #6 of 18 (permalink) Old 03-14-2008, 02:04 AM Thread Starter
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Mckey73 posted:
“So why is diesel 40% the cost of gasoline in europe and asia? Are their refineries that advanced? I'm throwing the B.S. flag on this one.”

Dave sez:
Part of the reason is that in Europe they have decided to tax diesel less than gasoline where the US reverses that.

In Europe they do not require <25 ppm sulfur. They are A-OK with 500 ppm. So their refineries do not have to run diesel through the Klaus train four times. Twice does them nicely. Further, Europe has no regulation like New Source Review to delay construction of new processes. If they need a Klaus train and have the money they build it. In the US getting the permit for one will take fifteen years and even then some grandstander from Illinois will try to bully the permitters into not issuing it. BTW, the Euros could not care less about PM2.5 so their “Euro 5” spec is much less stringent than the US Tier II requirements.

The Asians are even more laissez faire about it. The Japanese use 500 ppm but China, Taiwan and Singapore allow 5,000 ppm sulfur. Once through does them just fine. So their pre-tax prices are considerably lower than in the US.


DieselMonk mentioned heating oil. No. 2 heating oil is subject to the same sulfur requirements as diesel fuel. In case you haven’t noticed its price is sky-high just like road taxed diesel fuel. American refineries are masters of refining sour crude. American refineries were the first to generally use the Klaus Train to get the sulfur out of the crude.


Duke asked:
“Didn't diesel go higher than unleaded a few years before the ULSD came out?”

Dave sez:
Yeah it did. It was a seasonal thing. Since diesel fuel and No. 2 heating oil are the same product, the demand for heating oil (mostly in the Northeast) would drive the price of diesel over that of unleaded gas every winter, then the price comparison would reverse for the spring and summer as demand for No. 2 distillate dropped off and the refiners had to struggle with fifteen different gasoline formulations mandated by the EPA. When ULSD No. 2 requirements came along, the price of diesel could never quite get below that of unleaded gas.

Do you think all this ULSD is some sort of free lunch? Of course it costs – big time. Just like Tier II requiring these barrier filters on IH 6.4s and Cummins 6.7s and Duramaxes. The whole “soot” thing is all pain and nearly zero gain for the US.
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post #7 of 18 (permalink) Old 03-14-2008, 02:53 AM
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Cool I wish it was..

Quote:
Originally Posted by Duke
Didn't diesel go higher than unleaded a few years before the ULSD came out?

I remember paying less for diesel than unleaded all through the 80' & 90's and into about 2000. Then it crept up past unleaded. Now it's 25 cents more than premium unleaded.
When I bought my truck in Oct. of 03 we were paying $1.45 a gallon. My wife's Tahoe we were paying I believe it was around $1.89. Well I don't get the reason for the price gouging lately but there is a station that is 1/2 mile from my house which I don't even going to anymore after last weeks gouging took effect. he was $3.69 on Wed night. Thursday morning he went to $3.79 without a deliery then when I went by there again that night at around 5:30 it was at $3.87. Well on this past Tuesday he went to $3.97 and today I went by there and it was $4.17. $.50 in not even a week. Oh yeah the Getty station down the street got the brunt of my aggrevation since I pumped my diesel there in both my truck and wife's Excursion which will now sit it the back yard and the Scion will get used more often. His price is now $3.93 at the Getty where they were $3.85 last night. The price on gas was $3.05, $3.15 and $3.25. We are looking at $.92 / gallon more on diesel even though it is less refining. This is absolutely ridiculous.

Oh well off my soap box I go.

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post #8 of 18 (permalink) Old 03-14-2008, 11:58 AM
 
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Quote:
Originally Posted by Dave Whitmer
Mckey73 posted:
“So why is diesel 40% the cost of gasoline in europe and asia? Are their refineries that advanced? I'm throwing the B.S. flag on this one.”

Dave sez:
Part of the reason is that in Europe they have decided to tax diesel less than gasoline where the US reverses that.

In Europe they do not require <25 ppm sulfur. They are A-OK with 500 ppm. So their refineries do not have to run diesel through the Klaus train four times. Twice does them nicely. Further, Europe has no regulation like New Source Review to delay construction of new processes. If they need a Klaus train and have the money they build it. In the US getting the permit for one will take fifteen years and even then some grandstander from Illinois will try to bully the permitters into not issuing it. BTW, the Euros could not care less about PM2.5 so their “Euro 5” spec is much less stringent than the US Tier II requirements.

The Asians are even more laissez faire about it. The Japanese use 500 ppm but China, Taiwan and Singapore allow 5,000 ppm sulfur. Once through does them just fine. So their pre-tax prices are considerably lower than in the US.


DieselMonk mentioned heating oil. No. 2 heating oil is subject to the same sulfur requirements as diesel fuel. In case you haven’t noticed its price is sky-high just like road taxed diesel fuel. American refineries are masters of refining sour crude. American refineries were the first to generally use the Klaus Train to get the sulfur out of the crude.


Duke asked:
“Didn't diesel go higher than unleaded a few years before the ULSD came out?”

Dave sez:
Yeah it did. It was a seasonal thing. Since diesel fuel and No. 2 heating oil are the same product, the demand for heating oil (mostly in the Northeast) would drive the price of diesel over that of unleaded gas every winter, then the price comparison would reverse for the spring and summer as demand for No. 2 distillate dropped off and the refiners had to struggle with fifteen different gasoline formulations mandated by the EPA. When ULSD No. 2 requirements came along, the price of diesel could never quite get below that of unleaded gas.

Do you think all this ULSD is some sort of free lunch? Of course it costs – big time. Just like Tier II requiring these barrier filters on IH 6.4s and Cummins 6.7s and Duramaxes. The whole “soot” thing is all pain and nearly zero gain for the US.
Sorry Dave, Europe has 50ppm sulphur standard in diesel and they had that 10 years ago or more, when NA just switched over to 500ppm. I did drive diesel over there. Also they had Biodiesel on the pump at least 12 years ago. :shrug:
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post #9 of 18 (permalink) Old 03-14-2008, 01:45 PM
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I'm actually surprised there's not some sort of "grand jury investigation" into this. It just doesn't add up.

The price increases we all saw this week were induced at the local level, by the retailers. They stuck it to us.
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post #10 of 18 (permalink) Old 03-15-2008, 04:43 PM
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Quote:
Originally Posted by Duke
I'm actually surprised there's not some sort of "grand jury investigation" into this. It just doesn't add up.

The price increases we all saw this week were induced at the local level, by the retailers. They stuck it to us.
Price fluctuations are determined by market forces and will find equilibrium. If you are concerned about government collusion causing prices to be driven higher then don't ask the same government to somehow make them lower. Rather, effect change with your pocketbook, but the price is the price at this point, and we are just going to have to deal with it. Step number 1 would be to eliminate taxes, step number two to repeal so many ridiculous "pollution control" regulations.

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