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

Ken Meltsner meltsner at alum.mit.edu
Fri Oct 9 12:50:50 PDT 2009


Seems reasonable, but some refineries can work with heavier crudes
than others. When I was at chevron's Richmond refinery (mid '80s),
they had invested heavily to handle Alaskan and other heavy crudes,
and were burned when lighter crudes remained plentiful.

They had planned to take advantage of relatively cheap heavy crude to
more than offset the higher capital and operating costs, but numbers
went the other way.

Ken Meltsner

On 10/9/09, Aaron Burt <aaron at bavariati.org> wrote:
> 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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