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Refiners Tilt to Diesel Over Gasoline

May 27, 2008

WASHINGTON – U.S. refiners by now would be moving full-speed to ramp up gasoline production in advance of the summer driving season, but instead they are trying to maximize output of more-profitable diesel fuel. The global hunger for diesel, coupled with tight refining capacity, has made diesel one of the few bright spots in the refining business, catapulting prices higher than a parallel rise in gasoline, according to the Wall Street Journal.

Diesel prices were up an additional 18.2 cents last week to a record $4.33 a gallon, a 56-percent increase over the price at this time last year. Gasoline is climbing, too, but less dramatically. Gas prices rose 10.9 cents to $3.72 a regular gallon last week, 20 percent higher than a year ago.

Diesel’s higher price means the fuel is more lucrative for refiners at a time when gasoline profits are shrinking. While U.S. consumers are cutting back on energy consumption because of high fuel prices and a slowing economy, demand is growing briskly in the developing world, where diesel is often favored over gasoline. Unlike gasoline, which is used mainly in automobiles, diesel also fuels tractors, trucks, and electricity generators.

Although government data showed a build-up in the beginning of May in stocks of distillates, which are mostly diesel, supplies remain well below last year’s levels.

As diesel’s price increase has outstripped that of gasoline, U.S. refiners have been easing the throttle on gasoline production, cutting refiner operating rates to 86.6 percent from 89.5 percent a year ago, according to the latest weekly government estimates.

 

 

 

 

 

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