[FoRK] Authoritative explanation of gas spike in 2007/8?

Aaron Burt aaron at bavariati.org
Fri Oct 9 12:27:30 PDT 2009


On Fri, Oct 09, 2009 at 02:45:55PM +0200, Jim Whitehead wrote:
> Somewhat forgotten in the dramatic events that triggered this recession  
> is the gas spike of 2007/8. Have any of you on this list run across an  
> authoritative explanation of why this happened?

Best explanation I've heard:
Ultra low sulfur Diesel fuel is refined from Light, Sweet crude oil, not
other grades of crude oil.  Demand for ULS Diesel spiked due to a combo of
regulatory changes and economic conditions.

That caused...
1. refineries to favour ULS Diesel over gasoline production, and
2. a spike in the price of the benchmark grade of crude oil (and
only that grade).

#1 created a (minor?) shortage of gasoline, while news about #2 made it
possible to raise gasoline prices in line with LS Crude prices, even though
it was being produced from far cheaper grades of oil.

http://www.steinbergforcongress.com/2008/11/why-did-oil-prices-drop.html
http://energyoutlook.blogspot.com/2008/03/diesel-blues.html
http://seekingalpha.com/article/92363-did-big-oil-take-advantage-of-light-sweet-crude



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