Gas prices and alternative fuels -- two questions

[Percival P. Cassidy]

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

 

[Dori A Schmetterling]

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

 

[Greg (archive)]

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?

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.

 

[heydave]

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.

 

[Joe (archive)]

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.

 

[Dori A Schmetterling]

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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[...]

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.

[...]

 

[MoPar Man]

Oil comes out of a hole in the ground, and whoever owns the hole is keeping the money. They get paid by the barrel.

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.

... OPEC wants it that way. They control the price of oil as well as they can.

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?

Remember price doesn't have anything to do with cost.

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).

 

[Dori A Schmetterling]

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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[...]

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).

[...]

 

[MoPar Man]

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.

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.

 

[David (archive)]

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.

 

[Dori A Schmetterling]

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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[...]

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?

[...]

 

[MoPar Man]

Actually, it is because they are undergoing significant upgrading

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.

Most nuclear reactors in canada are over 30 years old.

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

And with the candu's in foreign countries showing signs of failure, they want to make sure they are upgraded in Canada.

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.

 

[Peter]

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?

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

 

[Bill Putney]

...in Europe taxes are lower
on LPG to the point where it becomes ~2x cheaper than gasoline...

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')

 

[Peter]

...in Europe taxes are lower

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

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

 

[Dori A Schmetterling]

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

 

[calcerise]

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.

 

[ThaDriver]

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.

 

[Daniel J. Stern]

I have heard also that about 3 ounces of acetone in you tank will increase your mileage by a few MPH.

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.)