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Old 09-09-2017, 05:54 AM   #1
vanski
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Default Diesel Prices?? - short term, mid term, long term, beyond???

Perhaps it's this great Santa Maria Valley Pinot Noir I'm drinking inspiring this question.... Sorry Alexander Valley your Pinots just don't do it for me, Ca central coast has you beat!

Here we are in the throes of diesel gate and it seems there's a world wide decrease in diesel vehicle production for the obvious reasons many of the newer Sprinter owners are experiencing; emissions systems are becoming too complex to manage, vehicle suppliers know this, and they are succumbing to govt/social regulation/pressure... so how is this going to impact diesel fuel prices? My economics degree, becoming ancient by the day, tells me the answer is fairly obvious; rational markets will adjust to demand over time (long term) and will eventually equalize, and be higher (let's say 5% higher than the historical average compared to the average comparison to gasoline (that is diesel has a historical reference let's say over the past 30 years to gasoline)) due to the overall decrease in demand and having to spread that cost across the supply chain. But perhaps the answer is much more complex? Perhaps there are manufactures that are so entrenched in diesel they can't make the leap to gasoline and they are willing to take a haircut on their margins, perhaps increase efficiency by overdue process automation, and those suppliers will stay diesel suppliers, create efficiencies specific to the diesel market, which pushes prices down over the long term? Or perhaps diesel manufactures just get out in the short run to the point we all just send our Sprinters to the junk yard and take some kind of emissions tax write off?

No pretending here to say I understand the petro market at all, just curious to what others think. Well I do understand the petro market is one of the most elastic markets that exists similar to rice, wheat, etc. That is buyers mostly just go to the lowest price without comparing who is supplying it; shell vs bp vs chevron, etc.

Of course we have other influencing factors such as alternative fuel sources ie electric, but perhaps we can put that to the side for the moment? I have a feeling many of our progressive members will not be able to simply push that VERY REAL conversation point to the side. And yes, if I can get the hp and torque out of an electric power center with the weight I'm carrying, not to mention making it reliable at a similar price point, SIGN ME UP!

So here's my take on short term (0-5yrs), mid term (5-10yrs), long term (10yrs - 20yrs), beyond...

+ 0-5yrs - prices will be historically lower than gasoline prices
+ 5-10yrs - prices will be historically like gasoline prices
+ 10 - 20 yrs - prices will be above average compare to gasoline
+ beyond - go electric or you better have your rig configured for bio and a relationship with your local Chinese restaurant.

Thanks to those of you playing along.. I just finished my bottle of sub-par Santa Maria Valley Pinot Noir which still beats the pants off most AV Pinots!

Last edited by vanski; 09-09-2017 at 06:05 AM.
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Old 09-09-2017, 06:19 AM   #2
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Default Re: Diesel Prices?? - short term, mid term, long term, beyond???

after thinking about this for another 10 mins... take my timeline and compress it by at least 50%. thoughts?
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Old 09-09-2017, 02:52 PM   #3
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Default Re: Diesel Prices?? - short term, mid term, long term, beyond???

Do not worry about it. What is important is to keep drinking the wine. The less diesel that is used in vehicles means more will be available to run the tractors in the vineyards.

Russian River Pinot's are also good. Maybe stop drinking a wimpy wine and go for a Syrah.

What is important here is the availability of good wine.
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Old 09-09-2017, 03:35 PM   #4
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Default Re: Diesel Prices?? - short term, mid term, long term, beyond???

The amount of diesel burned by cars, pick up trucks and RVs is small compared to what is used by transport trucks, agriculture and trains. Don't forget jets, jet fuel is more like diesel than gas. Some of the smaller vehicles might change to gas or electric but the big stuff will be diesel for some time. Refineries that make diesel also make gas and jet fuel and other products. I don't think they can make one without the other. When they break down a barrel of crude oil they get what they get. I'm sure they can fine tune the percentages but not by much. Governments make a big difference to fuel prices. They can tax diesel more and gas less or the opposite. It is easy for Governments to try and influence the market by picking favorites. To answer your question I don't think the difference between gas and diesel prices will change much and I don't think the change will be predictable.
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Old 09-09-2017, 03:53 PM   #5
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Default Re: Diesel Prices?? - short term, mid term, long term, beyond???

Quote:
Originally Posted by Graphite Dave View Post
Do not worry about it. What is important is to keep drinking the wine. The less diesel that is used in vehicles means more will be available to run the tractors in the vineyards.

Russian River Pinot's are also good. Maybe stop drinking a wimpy wine and go for a Syrah.

What is important here is the availability of good wine.
Wow Dave, impressive. I thought CP engineers saved all humor for Lockheed Martin design review meetings ;-)

I'd drink more Syrah, but I only drink Syrah with steak and if I eat more steak that means there will be more diesel tractors needed to push around the dun and less diesel for growing my Pinot Noir grapes.
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Old 09-09-2017, 03:56 PM   #6
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Default Re: Diesel Prices?? - short term, mid term, long term, beyond???

Automakers and regulators are part of the story, but not all of it. Diesel is heavily entrenched in our supply chains for food and transportation. While there's been an increase in negative sentiment lately, in a practical sense I don't see it as threatened; at least in the non-urban US.

I think it'll be a while until we have a viable alternative to diesel for long haul trucking, and even longer before that alternative is cost effective. Cummins recently announced an electric truck concept with a range of 100 miles.

It would seem that another factor is the total volume of refined crude oil. After fractional distillation, a certain amount of diesel is produced no matter what. Cracking and reforming can change the relative amounts somewhat.. there may be limits to that, but absent other factors if refiners continue to process similar crude volumes, production of similar amounts of diesel is likely to continue.
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Old 09-09-2017, 04:04 PM   #7
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Default Re: Diesel Prices?? - short term, mid term, long term, beyond???

Do transport diesels have the same emissions standards as non transport diesels? Of course this would vary from state to state country to country..
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Old 09-09-2017, 04:55 PM   #8
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Default Re: Diesel Prices?? - short term, mid term, long term, beyond???

When they refine crude oil, it converts into a myriad of flavors; Kerosene, gasoline, diesel.
They can not stop refining diesel unless they stop refining all the other stuff.
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Old 09-09-2017, 04:58 PM   #9
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Default Re: Diesel Prices?? - short term, mid term, long term, beyond???

In the medium term, the carbon emissions issue will come to dominate--facts are stubborn things. In addition, solar and wind will continue to progress technically, producing an excess of available electricity (already happening in some regions). The markets will adapt via electrified rail (and who knows, maybe electrified roads) for long distance shipping. Plus, I can't imagine that EV big-rigs won't be practical in 15 years. The battery issues are severe but clearly not fundamental, so it will be sorted eventually.

I agree that jet fuel is probably the long pole in the tent--no obvious alternative (although it is interesting to speculate whether there would be a market for cheap, slow, solar air transport for non-time-ciritcal shipping). The point about the link between petrol and diesel production is interesting. I wonder how basic and issue this is.
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Old 09-10-2017, 01:41 PM   #10
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Default Re: Diesel Prices?? - short term, mid term, long term, beyond???

In the Midwest diesel has been more expensive than gasoline most of the time. Trending about 10-15 % more expensive. Diesel historically competes with home heating oil in the fall and winter causing the diesel price to rise in the home heating season. Increasing the more expensive trend to 10-30% more expensive. Do not see any reason the diesel pricing will change much. Especially as less diesel cars and light trucks are sold.

https://www.eia.gov/petroleum/gasdiesel/
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