Gas prices and alternative fuels -- two questions

1. Who is actually getting the extra money for crude oil as the price
increases? Undoubtedly some of the increase goes to the governments of
the oil-producing countries, but do they get all of it? Or are the
oil-exploration companies getting some of that increase as well? Could
it be, for example, that XYZ Petroleum Distribution, Inc. is telling us
that they are having to raise prices because they are paying more for
crude, when in fact part of the increased price is swelling the coffers
of XYZ Oil Exploration Corp. (a foreign-registered division of the same
multinational)?

2. One reason there is an increased interest in LNG-powered vehicles is
that fuel is cheaper. What taxes are included in the price of LNG? Is
LNG for motor vehicles priced/taxed the same as LNG for heating? I am
asking because I am sure I recall that, about 20 years or more ago in
Australia, as LNG became more popular as a motor-vehicle fuel (e.g., I
recall that most taxis and many other commercial fleets in Brisbane were
using LNG), so the taxes on it were increased? Couldn't the same thing
happen elsewhere, thus tending to wipe out the cost advantage?

Perce

 

You can bet your shirt on it. LPG taxes in the UK will rise if many people
use it. Already some of its tax advantage is set to end in, I think, two
years.

DAS

For direct contact replace nospam with schmetterling

 

I think you mean LPG (liquefied petroleum gas--mostly propane), not LNG.
Liquefied natural gas would not be feasible in an auto due to the exotic
temperatures it would require. Some buses and institutional vehicles run on
compressed natural gas, although it contains less energy per volume of a
typical cylinder then LPG. I assume CNG is cheaper then LPG.

Engines can be run quite happily on natural gas, and it burns much cleaner
than gasoline as well.

 

1. In the laws of supply and demand, when supplies are short, prices
and profits go up all the way down the chain. Those that have what
others want, charge more for it. Gas supplies are effected by refining
capacity as well as crude cost. Refining capacity can be reduced by
increasing the varieties of fuel mixes produced say for seasonal gas
blends or regional differences in pollution regulations. Demand for
heating oil can also factor in. The economic boom in China and India is
cutting into supplies a lot. Too cheap fuel in the US for that past
decade resulted in lots of large gas sucking cars and SUVs being sold.
Now hybrids are the rage so their prices and high and the big SUVs are
cheap. Blame whoever you want or get a life.
2. It seems there is a rough coorelation between the fuel's ratio of
carbon to hydrogen and its usable energy content and a reverse
coorelation to safety. Diesel with its high carbon content makes for
very efficient engines at the expense of higher CO2. Gas is next then
propane (LPG) and methane (CNG and LNG). Finally there is Hydrogen. The
promise is for fuel cells to get away from burning fuel at 5-15%
efficiency to 60% or better for fuel cells.

 

I'm a chemical engineer, so I'll give you an honest answer to number 1. Oil
comes out of a hole in the ground, and whoever owns the hole is keeping the
money. They get paid by the barrel.

Here's the long version: There is a cost associated with pumping up a barrel
of oil, but the price of oil has very little to do with that cost. The price
of oil is set only by supply and demand. That's because OPEC wants it that
way. They control the price of oil as well as they can.

For the person who owns the hole in the ground, it makes sense to sign a
contract to deliver oil to some oil company every day. If the contract price
is fixed, like 1000 barrels a day for this year at $40 a barrel, then the
oil company gets a bargain when imported oil is higher than that, and they
get screwed when oil is lower than that. The better way to sell it is based
on the delivered price of imported oil. That way nobody is getting ripped
off. So, if you own a hole in the ground, you could contract to sell 1000
barrels a day at whatever Crude is worth that day, delivered at Gulf Coast
of Texas. In that case, when oil is high, the extra money all goes to the
person who owns the hole in the ground.

Whenever oil is high, it is more profitable to explore for oil. So, many
poeple will pay more to explore for oil. Could be oil companies, or foreign
goverments, but it could be bankers too. George Bush 41 used to do that for
a living. This doesn't drive up the price of oil, it's a result of the price
of oil. It drives up the COST of oil. I hope that makes sense, but it
probably doesn't. Remember price doesn't have anything to do with cost.

Now, you might think that if Oil Company X owned a bunch of holes in the
ground, where oil cost them $5 a barrel, and they bought some more Crude
delivered at Gulf Coast from Saudi, let's say, which cost $50 a barrel, that
they wouldn't know what gasoline was costing them day to day. All the
different oil companies would have a different gas price, based on where the
crude came from. It doesn't work that way. They sell it as if they paid top
dollar for it all. All the oil companies are keeping the extra money for
whatever holes in the ground they control.

If you're really old, you may remember the "windfall profits tax" from the
last energy crisis. That's when the goverment decided to grab some of the
money the last time this happened. Anybody else remeber that? I was just a
little kid. That was the first time I'd ever heard the word "windfall".

I don't know about #2, but I suspect that anything will be pricey if we burn
it all. Better to just not burn so much. Natural gas used to be cheap, too,
and so everybody started burning it for every reason. Now it's sky high.
Same with ethane-they used to give that away free, practically. Coal has
doubled in the past year or two. If everything stays up a while, renewable
energy might actually start looking economical.

 

In part-reply also to heydave, this is all well and good but has little to
do with the final price of the fuel at the pump in most parts of the globe.
I.e. a discussion about crude prices is fine if you're into oil trading but
of little interest to the average motorist.

The biggest single cost factor by far in most countries is the government.
At 80 to 95 pence per litre in the UK and EUR 1.05 for standard 95 octane
unleaded (approx 91 US) over much of developed Europe I couldn't give a toss
whether crude costs 20 dollars or 50 dollars a barrel.

(Of course it matters for heating and other uses of oil and gas where taxes
are much lower.)

DAS

For direct contact replace nospam with schmetterling
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Don't state/provincial/federal govt's get any cut of that oil money?

Don't oil companies own rights to drill for oil, but the oil is still
essentially owned by the gov't?

Alberta has no provincial sales tax and their health care is funded
pretty substancially some how by oil money. They have endowments for
hospitals and medical research that are really substantial. I wonder
if Texas has anything equivalent.

Technically, don't they control the _supply_ of oil (from OPEC
countries) and hope that their control over supply has the desired
result as far as what a barrel costs on the open market?

Technically, if the supply of something is at least equal to 100% of
the demand (or maybe 105% of demand), then the price for that
something should not be exorbatant. But when the price for that
something is twice what it was a year or two ago, then you'd think
that the supply now is maybe only 99% of demand.

Or, put it another way, given that oil is twice the price of what it
was 2 years ago, you'd think that some sort of rationing has happened
such that somebody that wanted oil wasn't able to actually obtain it
(which would happen if supply couldn't keep up with demand) and hence
the price for the item in question (oil) is 2x what it was a short
time ago.

Now if no such rationing has actually happened (ie if everyone that
wanted a barrel of oil was actually able to obtain it) then we can say
that supply has (always and consistently) met demand. If so, there is
no logical reason why oil has doubled in price. The markets may be
transiently irrational, but never for such a long stretch of time.

Explain this:

If there is a shortage of gasoline (perceived or real), and if said
shortage is blamed on lack of refining capacity, and if the wholesale
price of gasoline goes up because of this, then why should that also
drive up the price of crude oil? The Saudi's have repeatedly said
that they can supply the US with all the crude oil it needs, but it's
the lack of refining capacity (primarily) that makes gasoline prices
go up. So technically there is a "glut" of oil in storage (which the
markets recently discovered which resulted in a drop in oil below $50)
but still there seems to be a disconnect between the price of crude
and the price of gasoline. Gasoline may be in short supply (and
therefore expensive) but the price of oil shouldn't also rise because
of that (techincally it should fall).

Is anyone tracking the compensation packages of oil company executives
during this run-up of oil prices? What about dividend payments?
Just what is happening to the price of oil company stocks? You'd
think they'd be going through the roof, like Google (Did you hear Matt
Drudge last Sunday night? He couldn't believe that Google is worth
$60 billion. More than ViaCom. More than GM. He's right - Google's
share price will burst. I have no idea how they make money. Their
search portal looks is incredibly devoid of advertizing in my
experience).

 

The US is not the only consumer of oil. In most parts of the developed
world there is, indeed, little connection between the price of crude and
petrol at the pump.

In fact, we have had situations certainly in the UK where, when there has
been a reduction in petrol prices by a few pence per gallon (because of some
big drop in crude prices), the government has taken the opportunity to raise
taxes further.

DAS

For direct contact replace nospam with schmetterling
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You're about to have an election (where god knows why you're about to
put Tony Bliar back in power) and you're telling me the gov't has the
balls to _raise_ taxes on petrol just before an election?

Much of this thread has focused on the differences in the cost of
petrol/gasoline caused by taxes added at the pump which clearly has
nothing to do with the wholesale cost of the refined product or
regional differences of said refined product caused by regional
differences in refining capacity.

If market collusion continues in the US where refining capacity can
bearly keep up with demand then the wholesale price of gasoline should
(in theory) rise on merchantile markets in North America compared with
similar markets in Europe (unless refiners in Europe are doing the
same).

In general I think there is a conspiracy in North America when it
comes to energy (gasoline and electricity specifically) when it comes
to taking capacity off-line to force prices higher. Some of Ontario's
nuclear power plants are not on-line for some reason, and I think it's
part of a plan to reduce excess capacity on the eastern-north-american
grid to cause wholesale electricity prices higher this summer.

 

Actually, it is because they are undergoing significant upgrading to reduce
risk of failures. Most nuclear reactors in canada are over 30 years old. And
with the candu's in foreign countries showing signs of failure, they want to
make sure they are upgraded in Canada.

 

I did not say that.

"...we have had situations..." is not in the present.

Although I shall personally not be voting for the Labour Party (just in case
it is not clear to everybody, we vote for Members of Parliament only, not
the prime minister, though of course, this vote might be placed not on the
basis of the local candidate but on the basis of the preferred party leader)
I can understand why he has widespread support. Might not be so obvious
abroad. Similarly, Margaret Thatcher's standing abroad was much better than
in the UK for longer, as abroad one did not have her on TV or in the papers
every day.

DAS

For direct contact replace nospam with schmetterling
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Which has already been done (and which had taken much longer to do,
and the British company that bought some of the Ontario nuclear plants
got "burned" by the lack of profits and last I heard was trying to
sell them last year. If I recall correctly, all Nuke plants were
supposed to be up and running this year. Then earlier this spring it
was announced that some were either still off-line or will be taken
off line.

How old is the youngest nuke plant in the USA? UK?

I think the candu is the only reactor that doesn't produce
weapons-grade waste material (ie plutonium?). Or, in other words, if
Iran were building Candu's then I don't think there would be any fear
of them being able to use them to refine uranium for weapons.

 

2. One reason there is an increased interest in LNG-powered vehicles

I think you mean LPG - Liquified Propane Gas. Yes, in Europe taxes are lower
on LPG to the point where it becomes ~2x cheaper than gasoline. As others
have pointed out that situation can change, and apparently LPG prices are
bound to go up in future. LPG is also widely used for heating purposes... if
all else fails I'll get myself a nice house heating system and fill up my
car from it

Alternatively there's CNG - Compressed Natural Gas (methane), which can be
produced from organic sources as well. It's not as popular as LPG due to
various reasons, but is much cheaper and supplies are abundant...

Peter

 

What does the phrase "2x cheaper" mean? Statements like that must drive
mathematicians nuts.

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
adddress with the letter 'x')

 

...in Europe taxes are lower

Well, I'm a mathematician by education

What I meant was that for any given unit of measurement (where unit is less
than 1000 liters) the following statement is true:

(cost to purchase LPG) = (cost to purchase regular gas) / 2

Is it clear now? ))

In practical terms I pay ~1.8$/gal for LPG, and ~3.5$/gal for gasoline. CNG
is cheaper still, not sure how they meter it since it's in gaseous form but
I've heard your cost per mile is about the same as if you were buying
gasoline at ~0.7$/gal

Peter

 

This reminds me of a story told by my mother about the time she was a
student (many years ago....violin strings please....).

The lecturer/professor lectured the class about the misuse of the word
"half" and then concluded the harangue with the admonition that the "greater
half" of the class had not been listening....

DAS

For direct contact replace nospam with schmetterling

 

LNG is actually practical to an extent, Beech Aircraft had a project
with vacuum-insulated dewar tanks in vehicles and an airplane. However,
at natural gas prices currently the economic advantage isn't huge.

 

I have heard also that about 3 ounces of acetone in you tank will increase
your mileage by a few MPH. Currently waiting for someone in a Yahoo group
to give us his results before testing it in one of my rides...
http://pesn.com/2005/03/17/6900069_Acetone/
~ Paul
aka "Tha Driver"

A flower is nothing more than an educated weed.

 

Kee-ryste, will this stupid idea *never* die? Is it so much to ask that
you use the brain you were born with to think about this?

In the first place, mileage is not measured in "MPH". In the second place,
adding 3 ounces of *ANYTHING* added to a tank of gas will not improve your
mileage by any amount. In the third place, you can do extensive damage to
your fuel system by adding acetone, which is an aggressive active solvent.

DS (in the '70s they said the same thing about napthalene moth balls. It
wasn't true then, either.)