by DantesPeak » Tue 11 Mar 2008, 23:37:32
As I explained in some other threads the last week or so, the shortage of diesel is driving the price of oil higher.
$this->bbcode_second_pass_quote('', 'T')here is an imbalnce developing in the output of each barrel as compared with what was previously desired - even as little as a year ago. I am not a chemical engineer, but the output of each barrel of oil can be adjusted with certain parameters. US refiners are said to be the most adept at adjusting to changing quality.
However there is a limit. Diesel is in higher demand, especially in Europe. This has actually created a surplus in winter blend gasoline, as extra gasoline moves from Europe to the US. (Summer blend gasoline requires akylate, which takes special refining and processing, and is in short supply), while a diesle shortage persists in Europe.
The problem is there is not enough diesel even though winter gasoline is available (outside of central Canada). So more oil has to be refined to get the products needed.
Refiners are making a good profit on diesel, that may offset the low profit on gasoline.
http://www.peakoil.com/post615546.html#615546To put it simply, the increased demand for diesel can only be met by increased refining of crude oil - even if that leaves us with a surplus of other types of oil products.
The Wall Street Journal has caught on to this (does it read PO.com?), and provides some details.

$this->bbcode_second_pass_quote('', 'D')iesel Demand Remains Strong
Some Refiners See Further Opportunity Despite Price Rise
By ANA CAMPOY
March 12, 2008; Page A4
Oil and gasoline prices are again at new highs. But many in the U.S. refining industry are focusing on prices for another key liquid: diesel.
Diesel has followed the petroleum surge, ending yesterday at $3.82 a gallon, based on government data. Much as gasoline has pressured consumers, diesel is pressuring businesses that depend on the fuel.
But some in the refining industry see an opportunity. Their bet: Diesel is poised to take off. While skyrocketing prices have weakened demand for gasoline in recent months, global diesel demand has been growing.
Some analysts expect continued strong diesel-demand growth. In Europe, diesel will continue gaining market share at the expense of gasoline as consumers switch to diesel-powered cars. Developing countries such as China and India are consuming more energy. Those countries often prefer diesel over gasoline because of its flexibility: the fuel can be used to power industrial plants as well as transportation.
In the short-term, U.S. refineries that are set up mainly to produce gasoline have little flexibility to churn out more supplies of diesel. To increase capacity, refineries would have to invest heavily in new equipment. The U.S. will also have a hard time attracting barrels of diesel from abroad because of strong demand elsewhere, meaning the diesel market in the U.S. will continue to be tight.