Diesel Production (Lack of)

Submitted: Friday, May 16, 2008 at 10:16
ThreadID: 57657 Views:2768 Replies:5 FollowUps:9
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The following highlights one of the reasons why diesel is at a premium to ULP.

London (Platts)--15May2008/659 am EDT/1059 GMT
A lack of diesel production capacity and complex refining capacity is boosting demand for light crude, widening the difference in prices between light and heavy grades, OPEC said Friday.
In its latest monthly oil market report, the oil exporters' cartel said investments in refining so far this decade had failed to keep pace with rising demand for diesel and other middle distillates.
Between 2000 and 2007 world demand for distillates rose by around 5.2 million b/d, OPEC said, compared with an increase of just 2 million b/d in gasoline demand and a fall in demand for fuel oil.
Investment, however, was still geared towards gasoline production, with around 1.2 million b/d of gasoline-making conversion capacity added and just 700,000 b/d for distillates, "resulting in a mismatch between product demand and refinery output."
"The lack of refinery operational flexibility due to a shortage of proper conversion units to produce more middle distillates has left refiners with little option but to increase light grade throughputs, resulting in a widening spread between light and heavy crude," OPEC said.
Over the last year Saudi Arabia's Arab Heavy crude has seen its discount to WTI fall from around $4/barrel to around $15/b.
"The persistent mismatch between the product demand pattern and the refinery configuration has focused further upward pressure on light crude prices. Downstream constraints are continuing to contribute to the high risk premium for these grades, leaving the market increasingly sensitive to any disruption in light crude supplies," OPEC said.
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Reply By: Member - Willie , Sydney. - Friday, May 16, 2008 at 10:32

Friday, May 16, 2008 at 10:32
Hey Baz ,
We should start to make our own . Epping Oil has a nice ring to it .
I could never figure out the reason behind the disparity, so thanks for the info.
Willie
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Follow Up By: The Landy - Friday, May 16, 2008 at 10:40

Friday, May 16, 2008 at 10:40
Well I know you don't drink the stuff, but let's just brew beer instead and forget about the oil price!

The refining issue is a big problem and not one that will change quickly due to the lead time to construct refineries.

Epping Oil.....hhmmm does have a ring about it!

Chers
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Follow Up By: Member - Hairs (Lawrence,NSW) - Friday, May 16, 2008 at 15:44

Friday, May 16, 2008 at 15:44
I got to agree with Landy.
If we brew enough beer not only will we not have to worry about diesel, we'll be too drunk to drive anyway, and we'll forget about all the other things that get under our skin at the moment. I can't see a problem with that. Happy days.

I've just resigned to the fact it ain't going to get cheaper.
Therefore every things going to get dearer. Not happy Jan.
I do feel for the folks that have budgeted for X amount of dollars for fuel to travel and find that they can not achieve their dreams now.
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Follow Up By: Member - Mark G (NSW) - Saturday, May 17, 2008 at 22:05

Saturday, May 17, 2008 at 22:05
sounds like a well seasoned alcoholic to me
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Reply By: Member - David P (VIC) - Friday, May 16, 2008 at 10:50

Friday, May 16, 2008 at 10:50
From what I have seen on the business channels, they refer to "capacity constraints" which mainly refers to the lack of refining capacity, it seem, because the refiners are already spending considerable money to simply update their facilities staged decrease in sulphur content. They simply cant see enough return on investment (ROI). In the U.S. for instance, production can barely cope with current demand. If there is a continuing economic problem and sustained recession, we might see some very temporary relief, particularly if OPEC is worried by that prospect and the U.S. $ strengthens (unlikely)...so many imponderables.....cheers, silverback
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Reply By: The Landy - Friday, May 16, 2008 at 11:10

Friday, May 16, 2008 at 11:10
Silverback

Capacity constraints and increasing demand is a big problem, especially given the huge investment to upgrade refineries to produce diesel with a lower sulphur content. I posted a news story yesterday that pointed to the demand from China, especially for mid-distillates and the fact that it has curtailed fuel exports. This alone is placing upward pressure on prices.

Many are placing their hope that the Saudis’ will turn the tap on a little more to provide relief on the price of a barrel of oil and no doubt Bush will be chanting that mantra when he next visits the region. To what extent the Saudis’ can or are willing to will be closely watched. Although increasing oil production won’t solve the refinery capacity problem or the gap between ULP & diesel. It would provide relief on pricing though.

The increasing price of diesel is starting to have enormous spill over effects as evidenced by the many comments on this forum alone and may, overtime, see a reduction in four-wheel drive travel as the price of fuel influences spending habits.

The repercussions for those providing services to the growing band of travellers, especially in more remote areas, may well become severe enough to see a reduction in services provided. Once these services are lost it will take time before they come back, if at all.
AnswerID: 304111

Follow Up By: Member - David P (VIC) - Friday, May 16, 2008 at 11:33

Friday, May 16, 2008 at 11:33
Not to bang on about this, but that is why my question about fuel saving expenditure on vehicle mods. At least you get a ROI.....cheers Landy...siverback
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Follow Up By: The Landy - Friday, May 16, 2008 at 14:19

Friday, May 16, 2008 at 14:19
Absolutely, fully understand. What did you decide on the mods?
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Follow Up By: Member - David P (VIC) - Friday, May 16, 2008 at 15:15

Friday, May 16, 2008 at 15:15
Hi Landy, am still to sell my Civic, which saves reg and insurance costs then nail down the best quotes for the exhaust/tyre carrier mods then wheel/tyre combo and am still to decide which is the best diesel /gas mod. Had thought of Eco-Shot, but strangely the local converter of that product has dropped it for a different brand so that is the big decision to be made....the important thing I truly love the Jeep and can see myself putting high ks on it over many years (fingers crossed)....cheers...silverback
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Reply By: Member - Oldbaz. NSW. - Friday, May 16, 2008 at 13:12

Friday, May 16, 2008 at 13:12
I notice the difference in price locally between diesel & ULP has
grown to 25 cents a litre. Starting to bite deeply into the perceived advantages of running diesel over ULP....oldbaz.
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Follow Up By: The Landy - Friday, May 16, 2008 at 14:31

Friday, May 16, 2008 at 14:31
Oldbaz

It will be interesting to watch and see what impact it has on the sale of new recreational diesel vehicles. Although I'm not sure if the Bureau of Stats data drills down to that level of detail (recreational), but the proxy might be the number of new Toyota Landcruisers and Nissan Patrols being sold as the popular vehicles of choice.

Higher fuel costs will eventually bite into many facets of recreational four-wheel driving.

Cheers

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Reply By: Isuzumu - Friday, May 16, 2008 at 15:46

Friday, May 16, 2008 at 15:46
I am interested in going to Eromanga on the way to Innamincka, just so as to fill with the diesel they refine out there.
Now I am wandering how they will be going with their refining with every one now using low sulphur diesel...interesting....Some where I read that they supply a lot of diesel to Mt Isa mines.
Now Landy in lighten me here, now that happens there, but I am lead to believe that we cannot pump oil out of the ground and sell it locally because of trade agreements so how come they are doing it out there/ I do not know how oil they have, its probably not enough to make it a big concern maybe.
Any others theories I would like to hear them thanks

Cheers Bruce
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Follow Up By: The Landy - Friday, May 16, 2008 at 16:18

Friday, May 16, 2008 at 16:18
I'm not aware of regulation restricting the sale of oil locally.
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Follow Up By: Isuzumu - Friday, May 16, 2008 at 16:59

Friday, May 16, 2008 at 16:59
May be the way I read into it .....I will have to get a phone no for them and see what I can find....there is so much politics in it all bit hard to read between the lines.
Cheers Bruce
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