Quote:
Originally Posted by dzls rok
why is diesel, the least refined fuel, priced higher than premium? here in the bay area, its about .10/gal more than premium.
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The cost to refine diesel is miniscule compared to the raw materials cost. Same with gasoline. The difference between the cost to refine gas and the cost to refine diesel is only a penny or two per gallon after you factor out the cost of crude oil and factor in the volumetric expansion of gasoline during the refining process (the density decreases but the mass stays the same, so the volume increases. we sell it by the gallon so there is a net gain).
Crude oil costs around $2.70 a gallon.
The raw materials for diesel costs the same as for gas as they are made out of the same stuff (crude oil).
The cost to refine either is somewhere around 15 cents a cents per gallon depending on the size and efficiency of the refinery. It varies from place to place but not as much as some people think.
So why is the diesel price so much higher than gasoline?
Gasoline is a loser right now. Refineries struggling to break even with gas right now due to the incredibly high cost of crude and also because there is an abundance in supply due to over-production during the winter and reduced demand at the pumps. Little to no profit in gasoline at the wholesale level.
That same scenario doesn't apply to diesel.
There is enough to go around but not a whole bunch extra. The demand hasn't fallen off like with gasoline, if anythnig the demand for diesel is still increasing.
So the price of diesel is still realistic and cosistant when compared to the cost of crude. The net profit margin on diesel hasn't fallen off as much as it has with gas.
Here in So Cal in february, diesel was selling at a 40 cent per gallon premium over gasoline (wholesale). that has fallen but diesel is still more profitable. Obviouasly we tweaked the refining process as much as possible to maximize diesel production to keep from losing money.
Now, that all has to do with wholesale production. retail is a whole nuther story. The retailers are jacking the price of diesel as high as they can get away with due to a captive market, and they can get away with it because Joe Blow down the street is doing the same thing. Being a gas station owner right now is a very profitable thing to be.