Sunday, June 08, 2008

$4.25 a Gallon

This is how much a gallon of gasoline costs at the station down my street: $4.25 a gallon. That's roughly $1.13 a liter.

With gasoline so expensive by American standards, The Economist is speculating that diesel engines will come back as a popular solution, as an oily alternative to the hybrid cars and biofuels. Mercedes-Benz has developed a more fuel-efficient diesel sedan known as the E320 Bluetec, with a price of $53K. The petrol version of the same vehicle (at the same price) runs at 17 miles per gallon in the city and 24 on the highway, compared to the diesel engine's 23 (city) and 32 (highway).

But the price of diesel is expensive too. The diesel price in the US rose twice as fast as petrol this year. While both carry the same tax weight in the US, diesel now costs 60 to 70 cents more a gallon than regular gas. But while diesel is 20% more expensive than gasoline, it is also 35% more efficiently used.

Europe and the US differ in the way oil is refined too, giving way to different pricing schemes. The catalytic "crackers" used in American refineries are setup to produce as much petrol as possible, with the leftover being used for diesel, heating oil, asphalt and other products. In Europe the refineries' hydocrackers produce 25% petrol and 25% diesel. If Europe wants to produce more diesel, it implies producing the same amount of petrol as well, the exports of which are shipped to the US mainly. So producing more diesel in Europe implies lowering the world price of petrol as well.

At any rate, when I drive to and from cities that are somewhere between 30 and 40 miles away (Seattle and Olympia) it costs me approximately $5 per trip, which adds up even for my compact commuter car, the 1997 Geo Metro Sedan. It was once stolen and left somewhere in ditch. I bought it two years ago at an auction in Fife, WA for $1,800. For reasons other than my own self-interest, rising gasoline prices should be a positive influence, and should also be matched by changing consumer preferences and the development of petrol-using substitutes.

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