<DrumBeat: July 9, 2008 The Oil Drum DrumBeat: July 10, 2008>

206 comments on Why isn't the price of gasoline even higher?

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DaveMart on July 9, 2008 - 10:37am Permalink | Subthread | Parent | Comments top

One of my pals is considering a LPG car.
I have no idea what the security of supply is on that, or if taxes are going to be increased until there is no benefit - apparently they have risen by rather more than the tax on petrol in recent times.

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Gail the Actuary on July 9, 2008 - 11:23am Permalink | Subthread | Parent | Comments top

If I remember correctly, you are in Britain.

I would consider an LPG car a short-term solution. Britain is headed for a natural gas shortage in the next few years according to Euan. Since the electric grid there uses electricity, this is a real problem. Britain is at the end of the supply line from Russia, and closer supplies are declining.

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DaveMart on July 9, 2008 - 11:36am Permalink | Subthread | Parent | Comments top

Britain it is Gail.
Darn nuisance these electric grids that use electricity! :-)
I know what you mean though.
A cold winter in Europe could see the cuts start this year.
Still, we have Gordon Brown on the case - or 'the revenge for Culloden' as he should be called.

Interestingly, it was the 'prudent Scottish bankers' who lost perhaps half of the money the country possessed in the Darien scheme, with a little help from perfidious Albion, and got bailed out as part of the terms for the Act of Union.

Somehow I doubt the EU will want us.

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andybts on July 9, 2008 - 2:09pm Permalink | Subthread | Parent | Comments top

Yes, I'm starting to feel cold just thinking about this winter.

The Russia - Ukraine dispute may cause a crisis in Europe this time, and I heard somewhere (probably here) that Russia are also diverting some of their gas to electricity generation to replace the reduced output from their hydroelectric generation.

I'm only thankful I'm not in Ireland, which is even further away from the source.

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Cyril R. on July 9, 2008 - 11:53am Permalink | Subthread | Parent | Comments top

FYI the P in LPG stands for Petroleum. I don't think any serious amounts of propane is created with natural gas as a feedstock, and I don't know if butane has even been tried before. LPG is oil, so doesn't really make any meaningful difference with regards to Peak Oil, although it can be cleaner burning than the higher hydrocarbons.

I just got back from Hong Kong one week ago. All the taxi's were LPG because gas is heavily taxed. Much of transportation was electric. The british style trams (double) were very odd-looking.

All the glazing was single layered glass. That bothered me, with all those ACs blowing like madness!

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research24 on July 9, 2008 - 1:59pm Permalink | Subthread | Parent | Comments top

GAIL,

What did you think of T.Bone Picken's Nat Gas solution he presented yesterday?

I thought it made good sense, but I know a lot of people here would denounce it just on principle.

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Gail the Actuary on July 9, 2008 - 4:41pm Permalink | Subthread | Parent | Comments top

I should write a post about the US natural gas situation. Our supply is up a bit, but demand is up even more. One part is electric utilities using more natural gas; another is other kinds of uses, such as private autos making use of the fact that natural gas is presently cheaper than oil in terms of its energy content.

What I see as happening is various uses sending the natural gas price up to close to parity with the oil price. The amount of natural gas produced will go up a bit, but not a lot, because it takes a long time to put in pipelines. Also, we are close to maxed out on drilling rigs. Unconventional gas will be hard to ramp up much, because so much drilling is required.

At the higher natural gas prices, people with the new NG cars will find they don't save much money relative to gas engine cars. The fuel will not be widely available, because at current NG production levels, there isn't much NG available for cars. The price of electricity will soar in places that depend on natural gas, like much of the Northeast, California, Texas, and Florida. Homeowners will be up in arms.

About this time, natural gas supply will peak, and production will begin to decline. Then we will have all of the new users competing with the utilities, the ethanol plants, the plants making low sulfur diesel, the fertilizer plants, homeowners heating their homes, and regular manufacturing plants for NG. There will be a lot of unhappy former NG users.

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hugho on July 9, 2008 - 6:52pm Permalink | Subthread | Parent | Comments top

Excuse me Gail if I missed your answer to research24 in which he asked your opinion about T Boone Pickens' proposal. Perhaps you missed it but yesterday on Nightly Business Report on PBS he gave some details. His idea is to use the windy corridor in the middle of the country to generate electricity and use natural gas as transport fuel. He would use electricity for transportation where possible and use LNG for auto and truck transport fuel by adding natural gas filling units to existing gas stations at a cost of about 400K per station(yikes!). He would use the grid to heat residences and run industry more.You of course will see lots of problems with adding all this capacity to a grid which is old and creaky and which couldn't absorb all the new input without a massive build out. Your post was very good and explained a lot about the refining business. I would be interested in seeing a list of the various refiners including what their capability is vis a vis coking and cracking equipment on site, output capacity etc. I have also read that some products like asphalt may become increasingly expensive because some of the newer refineries with the new coking units can squeeze more distillate out of their crude and don't have to sell off the residual asphalt cheaply.

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Gail the Actuary on July 9, 2008 - 11:20pm Permalink | Subthread | Parent | Comments top

You are right. I didn't see the details of T Boone Pickens' proposal. I think a major hold-up to Pickens proposal is that it would need a huge overhaul of the grid. I don't see that happening within 10 years, even if Congress appropriated money tomorrow, and started work on getting contractors to first design the upgraded grid, then actually get the parts and build it. By 10 years from now, US natural gas will be past peak, as will oil. It is hard to see anything major happening at that point.

I am afraid I don't have a list of who has what in terms of coking and cracking equipment on site. Perhaps one of the readers knows of such a list.

I know that asphalt and residual oil are already disappearing, as refineries with crackers and cokers refine them into higher-priced products. The oil companies see this is a way of getting maximum profit from the crude oil, but it is leading to a lot less asphalt.

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WisdomfromPakistan on July 9, 2008 - 12:59pm Permalink | Subthread | Parent | Comments top

All rickshaws in karachi are running on either CNG or LPG, 80% are on LPG, 20% on CNG.

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memmel on July 9, 2008 - 1:16pm Permalink | Subthread | Parent | Comments top

A move to CNG and LPG replaces using NG to upgrade heavy sour oils not to mention the other critical uses for NG.

In my opinion we are heading quickly towards a world with the following fuel desirability levels.

light sweet > sour sweet > NG/LPG > heavy > heavy sour.

This is profoundly different from todays world with the heavy crudes priced at a premium to NG.

If I'm right then the light sweet vs heavy sour spread is going to widen considerably and NG cost reach parity and surpass the heavy oils.

This means refining the heavy sour crudes will quickly become only marginally economic. Your better off simply using the NG and propane directly. Your example shows this sort of transition.

CNG is actually the only real competitor for diesel in heavy trucking so expect a long term trend towards CNG is na lot of areas for heavy transport. Or better flex fuel trucks.

http://www.cleanfuelsohio.org/email_vol14.htm

SWACO’s truck was converted to run on a blend of compressed natural gas (CNG) and diesel fuel by U.S. Energy Initiatives Corporation (formerly Hybrid Fuel Systems), based in Atlanta. The system installed by U.S. Energy includes a computer interface that adjusts fuel blend levels recalibrates the engine on the fly for optimal combustion. Other installed components include tanks, lines and a pressure regulator for the CNG.

“This is the cool part about my job,” said Tim Berlikamp about the new heavy duty CNG vehicle in the SWACO fleet. “This is what I love to do.”

Needless to say at some point there will a huge squeeze on gasoline supplies from the critical industries via optimization of refineries for diesel production and directly using CNG and bypassing refining of the heavy sour oil unless they are steeply discounted.

Needless to say export land faces a big problem if the exporting countries are setting on large supplies of heavy sour oil KSA and Iran are two that come to mind. They will see economies continue to grow light sweet prices go up and no demand for the heavy sour oils except at what they consider insulting prices.

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Gail the Actuary on July 9, 2008 - 1:25pm Permalink | Subthread | Parent | Comments top

What do you see happening with medium sweet? I was thinking it would move up relative to light sweet, because it is easier to make distillate from.

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memmel on July 9, 2008 - 1:41pm Permalink | Subthread | Parent | Comments top

I think the medium sweets should track the lights. And your right you get more diesel out of them.

It really all depends on the various spreads not the absolute prices. As far as I know medium sweet is about equal to light sweet if you have a reasonably complex refinery.

One thing we don't do on the oildrum which is a shame is pay more attention to the spreads and prices of the various grades of crude vs NG/LPG although the absolute prices will continue upwards its the spreads that really matter if a refinery cannot make money refining certain inputs it won't refine them the absolute price is not relevant.

This is another place where free markets tend to have a tough time overall price increases tend to squeeze spreads but to meet demand you need the spreads to widen the net result is a fairly viscous upward spiral until demand drops. The problem is of course there is no downward pressure the spread is being widen via price increases not decreases. Oil producers might even make the claim that the market is well supplied because no one want to pay the prices they are asking for lower grades of crude.

But I can't imagine that any of the worlds crude producers esp the largest one would do something like that.

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memmel on July 9, 2008 - 1:59pm Permalink | Subthread | Parent | Comments top

Two replies.

Overall I think that a move to flex fuel trucks that can handle a mix of diesel/biodiesel/CNG/LPG etc makes so much sense that we will go that route.

If we just assume simple carnot efficies the NG+heavy source = 60% and diesel -> mechanical = 60%.
60%*60% = 12% efficiency

But burning the NG/LPG directly but mixed in with diesel gives you 60% a 48% increase in efficiency.

Given that trucks take known routes and the service stations that provide fuel for trucks retrofitting to handle pressurized ng/diesel mixtures should be fairly easily doable. And given the premium for diesel the economics should work out.

You can dissolve a lot of NG into diesel under pressure.

Found a patent on this :)

http://www.patentstorm.us/patents/5315054/description.html

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Gail the Actuary on July 9, 2008 - 4:46pm Permalink | Subthread | Parent | Comments top

I learn something new every day. I had never heard of dissolving NG into diesel.

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nelsone on July 9, 2008 - 6:04pm Permalink | Subthread | Parent | Comments top

Me too - I never knew that 0.6 * 0.6 = 0.12

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memmel on July 9, 2008 - 6:44pm Permalink | Subthread | Parent | Comments top

Crap :)
Its .36

The difference is then 0.6-0.36 == .24 or a 24% loss in efficiency.

Way to many dead brain cells and this is why the population of Nigeria is 300 million :)

Now you know why I quite doing synthetic chemistry a few mistakes like this and kapow.
I had my fair share of ohh shit moments esp if the reactions where in german.
One of the things I've learned in life is do not start a synthesis translating the german on the fly !!!
They like to put very important info near the end like what not to do to keep from blowing yourself up.
Saure and what this ? ohh crap.

In any case its a significant loss in efficiency so the argument still holds.

Hydrocarbons are quite soluble in each other. This is where all the gas comes from when you pump oil and take it to atmospheric pressure just like co2 in water.

I've got no idea what the exact solubilities are but its pretty high.

Found this.

http://pubs.acs.org/cgi-bin/abstract.cgi/jceaax/2004/49/i03/abs/je034138...

Thats not diesel closer to gasoline and I did not grab the paper but they are pretty high.

This trick is played with gasoline in the winter extensively i.e dissolving in volatile hydrocarbons.

I can't find the exact numbers but at least 10% is reasonable and a lot more at moderate pressures.
Adding in stuff like propane would probably help a lot.

It should be in this paper bit no access.

http://www.osti.gov/energycitations/product.biblio.jsp?osti_id=5244383

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nelsone on July 9, 2008 - 7:35pm Permalink | Subthread | Parent | Comments top

Diesel's kind of hydrophilic, and methane is of course completely nonpolar, so old or wet diesel may very well be a poor solvent for methane. But their mutual solubility is a complex function of pressure & temp in any case, so it would be tricky, to say the least, to volatilize the heavy liquid and the gas in a constant ratio.
"Like dissolves like" suggests you'd have better luck dissolving propane in gasoline.

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memmel on July 9, 2008 - 8:30pm Permalink | Subthread | Parent | Comments top

http://www.globalfia.com/downloads/manual.pdf

page 14 has some constants but I can't quite figure out what they are saying.

But they seem happy enough to use simple mole fraction calculations.

Surprisingly real solubility at pressure seems hard to find this suggest simple mole fraction arguments are probably good enough and they are infinitely miscible into each other.

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Neven911 on July 9, 2008 - 4:52pm Permalink | Subthread | Parent | Comments top

Memmel

Was "sour sweet" meant to be "light sour"?, was tending toward a chinese menu...Neven

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memmel on July 9, 2008 - 6:48pm Permalink | Subthread | Parent | Comments top

sour light :)

Bad day it seems.

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sorensen on July 9, 2008 - 5:53pm Permalink | Subthread | Parent | Comments top

1.2 million cars out of a total fleet of about 8 million cars are running on LPG in Thailand. More and more larger trucks are switching to CNG.
Robert

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Cyril R. on July 10, 2008 - 3:39am Permalink | Subthread | Parent | Comments top

Pretty much all Hong Kong taxi's are LPG powered. A ride costs 15 HKD for the first two km. Just a bit more than 2 USD.

If oil was expensive, I sure didn't notice it there.

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206 comments on Why isn't the price of gasoline even higher?

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