Gas Prices: Beyond The Grill
Can an anonymous email lower gas prices?

Diesel prices

Coffee_and_paper I received an unexpected wake up call this morning from a radio station looking to talk about gas prices.  After fumbling through the interview, I was awake and in the unusual position of having some spare time in the morning.  So, I picked up the Toronto Star off the porch (which is unfortunatelly often found at the end of the day with the rubber band still wrapped around it) and thumbed through it.  I'm glad I did because there was a great article on diesel prices by Tyler Hamilton (no relation that I know of).  For those who are interested, or haven't yet pulled the rubber band off the paper, here's a few highlights.

He compared the rising retail price of diesel to the retail price of gasoline, with results that won't come as a surprise to anyone filling up at the diesel pump these days.

Over the past 12 months, retail diesel prices have jumped 30 per cent, compared with just 10 per cent for gasoline. Since April 2005, when pump prices for the two fuels was roughly the same, diesel has climbed 48 per cent compared with 36 per cent for gasoline.

As for the reasons why, he talked to a few people who have been following the oil and gas industry for many years.

"The diesel story is simply amazing," said Spencer Knipping, a petroleum analyst with the province's Ministry of Energy. "It reflects the fact that diesel demand has been growing more strongly than gasoline demand worldwide, and that there's a somewhat more limited refining capacity for it."

Oil analyst Michael Ervin, of MJ Ervin & Associates in Calgary, attributes the disproportionate rise in diesel prices to high demand and tight inventories in Europe, where the fuel commands a much higher share of the transportation fuel mix.

The article also talks about crude oil prices, providing similar reasons to those outlined in my last post.

A more obvious part of the increase relates to the underlying price of oil. Strengthened by a weakening U.S. dollar and concern about global supply, a barrel of crude delivered in May now fetches a record $113.58 (U.S.) on the New York Mercantile Exchange.

There is more to the article and I'd encourage anyone interested to read it.  The factors outlined in the story are the fundamentals behind the price at the pump - for diesel and gasoline.  Crude oil is the basic ingredient in both products and is influenced by a set of global circumstances.  Diesel, or distillates, seem to be impacted by global demand at this time as well. Together, plus taxes and a margin for retailers, you have the final retail price.

There are more articles here and here that show these factors are being felt at diesel pumps around the world.  There is also a really interesting stream of comment conversation over at   

Photo credit:  Pragmagraphr


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so what's the solution to rising prices

there is a constrained production network - which spikes prices for everyone whenever any part of the system encounters a problem

a constrained supply system - OPEC and hangers-on Canada, Russia etc.. who ride on their coattails

unconstrained demand in emerging economies trying to produce and ship for global consumption

a shift in biofuel demand that is raising the price of food around the world - which if unchecked has the makings of an epic human tragedy

a speculators market in the commodity exchanges that effectively raises the price for all - regardless of the supply/demand

How much money does the upstream need to make before its satisfied

Do we need governments to enact a profit surcharge tax to moderate profit taking

Is fuel now a strategic resource - too important to be passing through so many (speculative) hands

At what point do corporations begin to share some of the responsibility for what is happening around them

Like the ancient Chinese proverb states
"May you live in interesting times"

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