Ask the Fuel Expert
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Ask the Fuel Expert is a monthly column of practical advice to business for lowering fuel costs and managing fuel intelligently.
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Contact Bill Bishop
1-604-513-0386
a friend of mine translated this into French us, hope our Quebec readers enjoy! http://askthefuelexpert.com/node/113
Jack Lee
The average price for retail diesel moved back above $3 per gallon in the U.S. compared to $2.265 just a year ago. That is the first time the $3 mark has been broken nationally since November 15, 2008.
Furthermore, AAA reports that gasoline prices are averaging some 80 cents per gallon higher than they were on this day one year ago. Five states have regular unleaded gasoline prices over $3 per gallon Those states are Alaska, California, Hawaii, Idaho, and Utah with the cheapest regular gasoline is found in New Jersey, where average levels are just under $2.67 per gallon.
Meanwhile crude oil prices have been ever steadily heading upwards towards the magic $100 mark. OPEC has been keeping a steady beat of communications about being "happy" with the average of the $75 a barrel price. They may get their wish sooner than expected as crude oil will be flowing from wells such as the Alberta oil sands at that price. But the $100 a barrel price for crude oil may once again be tested before that occurs.
An oil expert with the U.S. Energy Information Administration, was recently quoted that “A chance exists that we may experience a decline of crude oil production between 2011 and 2015 if the investment is not there”.
This warning on oil output issued by Obama’s energy administration comes at a time when world demand for oil is on the rise again, and investments in many drilling projects have been frozen in the aftermath of the tumbling of crude prices and the world financial crisis.
Glen Sweetnam, director of the International, Economic and Greenhouse Gas division of the Energy Information Administration at the Department of Energy, does not say that investments will not be “there”. Yet the answer to the issue of knowing when, where and in which quantities additional sources of oil should be put on-stream remains widely “unidentified” in the eyes of the most prominent official analyst on energy inside the Obama administration.
The “peak oil” theory assumes that world crude oil production should irreversibly decrease in a nearby future, in want of sufficient fresh oil reserves yet to be exploited combined with an ever increasing demand for fuel by the world.
The Obama Department of Energy now supports the alternative hypothesis of an “undulating plateau”, which states: “Once maximum world oil production is reached, that level will be approximately maintained for several years thereafter, creating an undulating plateau. After this plateau period, production will experience a decline.”
Canadian authorities have given their blessing to a proposed pipeline project that would bring crude oil extracted from Canadian oil sands into the U.S. Gulf Coast.
A construction application for TransCanada Corp., to expand its Keystone Pipeline to reach the Gulf of Mexico, received approval from Canada's National Energy Board (NEB) on March 11. Decisions on applications for other U.S. regulatory approvals are expected by year's end.
TransCanada, under pressure from crude producers, has agreed to consider allowing conventional crude from the Bakken oil fields of Montana, North Dakota and Saskatchewan on the line.
Previously, TransCanada had resisted requests from US oil producers to ramp up into their pipeline for crude oil from those fields, drawing protests from those producers, who said there was sufficient demand for the oil. TransCanada now says it will meet with individual parties to work out the details of potential entry points to the pipeline.
Recent studies show that the Bakken Formation currently contains as much as 3.65 billion bbl of proven recoverable oil with estimates of up to 50 billion barrels still waiting drilling activities to start up; Meanwhile, Canadian oil sands hold 1.7 trillion barrels of oil, according to estimates.
Robert Jones, Vice President with TransCanada, announced on March 3, 2010 in Billings, Montana that they would consider allowing the US access to the Keystone XL pipeline. It is currently being built to bring much need crude oil extracted from the Alberta Oil Sands to the US Gulf Coast refineries.
Calgary-based TransCanada Corp. will begin construction on the 1,980-mile pipeline this year making a $12 billion investment.
The company previously had rebuffed calls to build an "onramp" for crude oil from the Bakken oil fields of Montana, North Dakota and Saskatchewan, claiming there was insufficient demand.
But facing political pressure, TransCanada Vice President Robert Jones said Wednesday Keystone XL had reconsidered their position was "open for business" and would talk with conventional crude producers in the United States.
Jones made the pledge after meeting with several dozen oil company representatives, who were brought together to meet in Billings by Montana Governor Brian Schweitzer and North Dakota Governor John Hoeven.
Governor Schweitzer had threatened to withhold regulatory approval to grant right of way through 290 miles of Eastern Montana in order to force TransCanada officials back to the table and negotiate in good faith.
Terry, my hometown, is located in Prairie County in Montana will be greatly affected by the building of this pipeline. It being built right smack down the middle of this sparsely populated 1,700 square mile area made up of Badlands and cattle ranches.
The economy of this county needs diversification away from being agricultural and will now become part of the international solution to the energy needs of the free world.
Statistics is the science of producing unreliable facts from reliable figures has proven to be true when it comes to the US Department of Energy inventory reports, which are published weekly each Wednesday morning. The petroleum trading community has banked in the past on those numbers to give them some kind of indication on the immediate trend for finished product prices. But as of late even when those numbers have shown big builds fuel prices have increased instead of going down as expected. It will be rocky ride in 2010 for both crude oil and fuel prices. The wild swings in finished product prices will cause the economic recovery in Canada and the US to slow down.
Terry, Montana
Royal Dutch Shell is slowing its expansion into high-cost Canadian tar sands and will in the future focus on exploration of conventional deposits of oil and gas, rather than expensive, capital-intensive projects, according to their CEO Chief Executive Peter Voser.
Environmental groups have been waging an ardent campaign against the Alberta oil sands projects, protesting about their impact on air, land, water and communities. In addition concerns have been raised about the potential impacts of climate change legislation on any further exploration.
Shell has about 20 billion barrels of proven reserves in the oil sands projects, which represents almost a third of Shell's total resource base. The overall picture may become clearer once crude oil becomes scarcer and the price goes back over $100 a barrel.
The Shell Alberta oil sands project was originally driven by the economics created by the 2007 and 2008 run up to $147 for crude oil prices. The subsequent collapse for crude oil prices and slow recovery of the world wide depression caused demand for fuel to decrease and high priced crude became no economical enough to use in the slate of raw materials for oil refineries.
When it comes to having your drivers fuel their own trucks they can go slower than cold molasses running uphill.
It's usually just another chore on their check list of things to do after they have had an exhausting day running, delivering or picking up freight. Time is money with truck fueling and maintenance checks cutting into going home to having a warm meal and some good company.
What is actually costing the drivers’ productive time and energy to be reduced is the paperwork necessary to hold them accountable for miles driven versus fuel used. Paperwork reports can cover any mistakes made during the day and reviewing those for errors by the supervisor is very time consuming.
4Refuel Total Fuel Management (TFM) can take care of those efforts with all the tools and prepares reports ready at your finger tips to help you reduce the cost of the second highest expense on your books after labor.
In cold weather a carpenter doesn't forget about his sore thumb till he hits his thumb again! Then the first hit didn't seem so bad. You can stop hitting your thumb on your equipment fueling and fuel management reports by having 4Refuel TFM handle that important function for you.
The US and Canadian energy futures market has been one more tool to help control fuel costs or lock in prices for end users such as big trucking companies and airlines. For others, such as financial firms, it’s been just one more way to make money.
That will soon change with the US Commodity Futures Trading Commission considering stricter regulations on speculators in the energy futures markets.
"I believe that the CFTC has a duty to protect the American public from fraud, manipulation and excessive speculation," said the commission’s chairman, Gary Gensler, during public hearings on futures trading last week. "Thus, it should be the CFTC that sets position limits on energy market participants."
In the past 10 years, more and more energy futures contracts have been written and traded.
The annual volume of all energy futures on the New York Mercantile Exchange grew more than 450 percent between 1998 and 2008.
After the roller-coaster ride of 2008 in the price of crude oil, experts say it is likely that the commission will put limits on nonproducers and nonconsumers of energy products.
This is already having an immediate impact on prices paid for fuel in the US and Canada. The big investors will soon be unable to gamble on energy futures without disclosing their positions.
The old way of trading in energy futures had the big investment banks take huge positions in the market. They thereby were able to have an influence on driving the price of fuel either up or down we paid at the pump without them ever having to take delivery of any wet barrels.
Bob van der Valk
Fuel Pricing Expert
"the Gas Guy"
Currently diesel fuel is cheaper than gasoline in Canada and vice versa in the US. Canadian truckers, who were paying $1.45 per litre in June 2008, are now just paying 92.5 cents in the first week of September per the M.J. Ervin & Associates weekly petroleum prices survey. That’s a whopping 36% savings in 15 months.
Gasoline prices also dropped drastically in the same time period from $1.35 per litre from June last year to .994 cents per litre in the first week of September 2009. That is complete reversal from paying 10 cents per litre more for diesel to paying almost 7 cents per litre more for gasoline last week.
According to Statistics Canada, in July 2009, six of the seven major petroleum products posted declines compared with the same month a year earlier. The decrease in total product sales was led by diesel fuel, down 314.7 thousand cubic metres (-12.5%). Motor gasoline was the only product in the major petroleum product group to post higher sales, up 158.9 thousand cubic metres (+4.3%) from July 2008, and the fifth consecutive month-over-month increase in motor gasoline sales.
Fall is here and with that refineries usually switch to maximize heating oil production for the coming winter. With trucker demand down prices will start decreasing at levels seen during the winter of 2008-2009.
With relatively low diesel prices and anemic demand, fleets and shippers may get lulled into a false sense of security about their fuel costs.
Although the average ultra-low-sulfur diesel (ULSD) spot price in the U.S. for June was an astonishing $2.03/gal cheaper than one year ago, at $1.82/gal it is a whopping 43cts/gal higher than the average just six months ago.
The same goes for Canada where prices have increased exponentially to the US diesel fuel prices. M.J.Ervin reports that the diesel fuel prices in Canada averaged 88 cents per litre as of 7-29-2009.
The trend for the next month is up but will then ease up after August.
The factors that affect diesel fuel prices seem complex, but an understanding of the basic principles can empower the individual consumer to make the right decisions.
Rising diesel fuel prices can translate to increasing costs of products and services. In order to know what can be done to slow down this increase, you as a consumer need to be aware of its causes and find creative ways to save money on your fuel usage.
Given a barrel of crude is 42 gallons; the average refinery is able to produce about 8 gallons of diesel and jet fuel or 20 % of the total. About half of the barrel is made into gasoline with the remainder in low end bunker fuel oils and other petroleum products. Refining accounts for nearly fifteen percent of diesel fuel cost.
The remaining elements of the cost of diesel fuel are government taxes and the expense of advertising and delivery. A ten percent excise tax is levied onto all fuel products that are refined in Canada. Although foreign fuel can avoid this tax, it is generally cheaper to buy locally refined fuel as import taxes generally are passed along to the consumer.
Saving fuel and lowering consumption is not only good for the environment; it decreases demand, and ultimately your cost.
Bob van der Valk
Fuel Pricing Expert
"the Gas Guy"
Freight trucking is a sector that does not have existing fuel economy standards but could benefit significantly from fuel efficiency improvements given the tens of thousands of kilometers and miles each truck travels every year.
This can be done in various ways:
- Reduce engine idle time by not allowing drivers to leave engines running while parked for extended periods
- Reduce congestion by improving highways, if necessary by raising the fuels tax.
- Use more productive truck combinations.
- Support national fuel economy standards for medium and heavy-duty trucks.
- Trade in trucks with low fuel efficiency for those with higher fuel efficiency.
Right now would be a good time for Canadian and US truck and car owners to consider trading in their ten year and older vehicles for one of the new models.
The US “Cash for Clunkers” program was an example of that.
Although its primary purpose was economic stimulus, according to figures released by the Department of Transportation, it will also have real fuel-efficiency benefits:
- The average fuel efficiency of trade-ins was 15.8 mpg.
- The average fuel efficiency of new vehicles purchased was 25.4 mpg.
- 83 percent of the trade-ins were trucks.
- 60 percent of the new vehicles purchased were cars.
By trading up to a more energy-efficient vehicle will have the additional benefit of spewing out fewer carbon emissions into the environment.