“The government does not want to tell the truth in the Parliament. It wants to run away from the coalgate scam [a reference to a political scam involving coal allocations in India] and wants to evade the issue of corruption by raising the fuel price….Once the session is adjourned, government and the oil marketing companies will go for another hike in the price of diesel, petroleum, and other petroleum products and it has become a routine for the Congress….”-Prakash Javadekar, Bharatiya Janata political party in India

In the United States, as of 05 September 2012, the contract price for New York Ultra Low Sulfur Diesel (ULSD) was at $3.15 USD per gallon for delivery on 12 October 2012.  That can be considered the wholesale price before it gets to the gas station.  You can add another one or two dollars, plus taxes, retail at the pump in October.

The 05 September contract is not as high as the peak in March 2012, that hit $3.30, wholesale.  The 2012 low contract price for ULSD was in June, at $2.70 per gallon, but it’s been rolling back uphill ever since.

In India, rising costs of Diesel and Kerosene are being blamed on inflation (usually caused by increased demand) and the increased costs of fuel production.  Most refiners in India are government owned, and they claim production costs have gone up 28%, and they want to pass it on to consumers.  There’s no detailed explanation as to why production costs are up, the most obvious reason is that crude oil prices have gone up (it accounts for 60% of refining costs in the United States).

New Zealanders are complaining, even though their fuel prices have come down since they hit record levels in May (for gasoline) and July (for Diesel).  The problem is New Zealand imports its fuel.

More people, outside the U.S., use Diesel because it is more efficient than gasoline (petrol), thus part of the reason for the increased demand globally.  But in the United States, emission laws, and a bad stigma, has Diesel relegated mainly to the transportation industry, with relatively few personal vehicles running on Diesel.  Just think what would happen if tens of thousands more people in the U.S. started driving clean burning Diesel powered cars that get 50 miles per gallon?

But what about supply and demand here in the United States?

According to a report by Institute for Supply Management Non-Manufacturing Business Survey Committee, August commodity prices, and supply levels, are not consistent with supply and demand.

The report says fuel prices are up, but supply is not down!  It stated that Diesel 1 & 2, and gasoline up in price, yet “….no commodities reported in short supply.”

However, at the end of August 2012, California reported a 15% drop in CARB (California blend) Diesel inventories.  The result was that prices for CARB Diesel commodities traded in San Francisco hit highs not seen since 2007!  But that should affect only California, with their narcissistic environmental policies.

The main reason for the drop in California fuel supplies is blamed on refineries shutting down for maintenance.  However, the Golden Eagle refinery was shut down due to a failed compressor on a hydrodesulfurization unit.  Then there’s the Richmond refinery which has been closed for a month due to a fire.

The U.S. Energy Information Agency (USEIA) is reporting some interesting, and at first glance, conflicting data for the whole country, such as bio-Diesel production is way up.

From January to June 2012, 523 million gallons of bio-Diesel (From vegetation, by the way that’s what Rudolf Christian Karl Diesel intended his original Diesel engine to run on.) were produced.  That’s 158 million more than the same time in 2011.

However, the USEIA shows a drop in petroleum based Diesel fuel (No thanks to Rockefeller and Standard Oil, Rudolph Diesel was sued and lost the right of the use of his name for the peanut oil based fuel for his engine. Rockefeller & Standard Oil created a petroleum based fuel they called Diesel.) for the month of August.  Petroleum based Diesel fuel is now officially called Distillate Fuel Oil.

According to USEIA data released on 06 September 2012, for the week ending 31 August distillate fuel oil (DSO) production was at 4,341,000 bpd (barrels per day).  That’s down 326,000 bpd from the week prior, and down 287,000 bpd from the last week of July.

Also, in the “Product Supplied” category, DSO actually supplied at the end of August was down from the week prior, by 342,000 bpd.  It was down by 525,000 bpd compared to the last week of July.

So production, and product supplied, dropped at the end of August.  So at first we could say prices are up because supply is down.  But wait, there’s more!

While production is down, stock piles are up!  Stocks of DSO jumped from 124,265,000 barrels at the end of July to 127,076,000 barrels at the end of August, an increase of 2,811,000 barrels!

How can stocks go up if production went down?  Imports!

Imported DSO has been going up.  At the end of July imported DSO was at 62,000 bpd.  By the end of August it jumped to 135,000 bpd!

What this means is that despite a glut of oil available for refining into fuels, petroleum Diesel production within the United States is going down (for various reasons, most known only to the oil/refining companies), resulting in an increase reliance on more imported Diesel, and driving fuel speculators to bid higher on future deliveries of domestic Diesel fuels.

Keep your fingers crossed for the new Diesel refinery to be built near Williston, North Dakota!