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That sounds like a great theory but is not consistent with the observation that until not too long ago, diesel used to be cheaper. How do you explain that? Tha
by teiferer 21d ago
That sounds like a great theory but is not consistent with the observation that until not too long ago, diesel used to be cheaper. How do you explain that?
That's the problem with hindsight theories, especially if only using a limit horizon into the past.
- bluGill 21d agoSupply demand. As refineries got better at cracking fuel they made more and more gasoline since that is what the market wanted. However to change the mix they need to make a long term bet on it isn't worth it to build/rebuild their expensive refinery to produce a different mix. A refinery only has a small amount of ability to change what comes out, they can't make more diesel without a major rebuild and that isn't worth it.
- travisb 20d agoIn North America, it's fracked oil making up for declines in conventional crude oil production. Over the past 20-ish years fracked oil, which is mostly too light to cost effectively refine into diesel but makes nice gasoline, has made up most of the increase in oil production. At the same time, conventional crude oil production has been slowly declining. Conventional crude is quite easy to refine into diesel. Heavy/sour crude replacements are more expensive to refine into diesel because more work is needed; also preexisting refineries need refitting to support it. The net result is that diesel production hasn't kept up with the wider percentage increase in oil-based fuels and refinement is more expensive because it's a choice between cheaper oil which requires more work and costly refits, or less-available and therefore more expensive base oil. Thusly diesel is more expensive due to cost of production and reduced relative supply.