Quote:
Originally Posted by motion
Sammy, I was under the impression that diesel was tied to the heating oil market, which always increases during the winter. I could be totally incorrect, however.
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That is true to a certain extent.
Straight run diesel and gasoline are separated from the crude oil, but that's only a small part of the finished product.
Refineries can take oils and such and rearrange the molecules to make almost whatever they want. the raw feedstocks can be turned into gasoline, or diesel, jet fuel, or home heating oil.
Since heating oil is basically a very clean kerosene which is close to diesel, the same operating units usually make both. So if they are maximizing home heating oil through a hydrocracker, that takes away capacity for making diesel.
if they take away diesel producing capacity it reduces the amount available which drives up price. Nowadays we import so much fuel from overseas the market is supposed to be more stable but with emerging markets like China competing for that fuel it makes everything less stable and raises the price.