Gas Man: Keep exploring for energy

By STEPHEN SUTHERLAND
Local columnist

November 21, 2008 10:10 am

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Well it's happening already. The impact of lower fuel prices is changing how the U.S. and other countries live and do business. That old attention deficit disorder syndrome is rearing its ugly head again. It seems like only yesterday the country had plans to rush to energy independence. I guess it seems like that because it was only yesterday.

Recently with new technology, Canada has been able to capitalize on one of the largest oil fields in the world. This is the Alberta sands project. The new technology allows Canada to extract oil from the tar sands.

The tar sands, commonly known as the oil sands, are a mixture of sand, water, clay and bitumen, which is heavy black oil. This oil can't be pumped through oil wells in the traditional way, but through new technology the oil can now be inexpensively extracted from the sand.

There are two processes being used for the extraction of this oil -- in situ and situ. In situ simply means to process the oil in ground. This is accomplished by injecting heat into the ground to melt the oil so that it will flow and can be pumped. The situ method means to mine or strip mine the sands then process the sands to separate the oil.

For some time now, Canada has devoted significant sums to the tar sands project, but recently announced that because of the drop in crude prices there is less of a rush and it's cut the tar sands budget in half.

It is projected that Utah also has in excess of 12 billion barrels of tar sand oil deposits. Unknown to most Americans we also have vast oil deposits trapped in the shale in Colorado. With the new in situ methods of injecting heat into the ground, the U.S. should be able to take advantage of these deposits also -- if we are truly serious about our energy independence.

This past week on Fox News, T. Boone Pickens was asked why the country should bother with wind and bio-fuels now that energy prices are so low. I also wonder how the federal government will be able to push bio-fuels that need to sell at $4-5 a gallon when diesel is under $3. On Thursday crude oil prices dipped below $50 a barrel and diesel and gasoline are continuing to fall. Bio-fuels cannot compete with these prices.

In the Bible there is a phrase that says "there is nothing new under the sun." I find this statement to be true. Throughout time, history just keeps repeating itself. Which brings another cliche to mind -- those who do not learn from history are doomed to repeat it. Will we ever learn? Will we ever follow through? Will Congress and President-elect Obama let the country drill in sensitive areas or will they allow the prices to climb again?

Gasohol and bio-diesel cannot compete with $2 a gallon fuel. In the '70s when gasohol was first imposed upon us, the oil market caved in and gasohol went by the wayside.

Some things that were tried before should not be tried again. Crude oil is now under $50 a barrel, while oil producing nations want the price above $80 a barrel. Many of these people do not like us, and they do not have our interests in mind when setting their production levels.

America needs to drill now and drill fast, then if foreign oil is cheaper we should buy it and save ours. But under no conditions should the U.S. continue to be dependent on foreign oil.

The price of diesel

I've been in the oil business for most of my life and I find it absurd that diesel fuel is a buck a gallon higher than gasoline. This one you can't blame on the local suppliers. All the blame belongs to the major oil companies. I can think of no reason that diesel costs so much more than gas. Yes there are times that diesel costs a few cents more than gasoline, but typically throughout the years diesel is cheaper or within a few cents of gas depending on the season.

In the refining process, you start with a crude oil of some level. Typically, as oil is refined, it starts somewhere around a No. 6 then as it's refined it drops to a No. 5 then 4, 3, and eventually you get to a No. 2 oil which is used for heating or diesel fuel. After that you have No. 1, then kerosene, white gas for Coleman lanterns and on into the gasolines.

The refining process removes the paraffin (wax) which holds most of the BTUs (British Thermal Units). The higher the number the higher the BTUs.

Quite often when asked, the oil companies will say that it's the new lower sulfur content regulations that create the higher diesel prices. But those regulations have been around for years now, so that's not it. I believe that the oil companies want more so they are taking it.

If you want oil prices to stay low, write your Congressmen, use additives, drive sensibly and conserve whenever possible. Just because prices are down again, it does not mean that you should forget the hard times. Forgive and forget should not apply to higher oil prices or our national security.

The Gas Chart

Although prices are falling dramatically, local gasoline margins remain strong. They're a little more reasonable than in other periods, although from Tuesday to Thursday this week the margins bulged again. As for No. 2 heating oil, those prices are falling also. A quick price check shows No. 2 around the $2.369 a gallon mark, which puts No. 2 margins in the mid to upper 50-cent range. Keep in mind No. 2 is delivered to your home so they need more margin, but I agree the margins may be a little high.

Nov. 7-13

Nov. 14-20

Not all suppliers are able to buy at the above prices. Keep reading and keep writing, it's good to hear from you. thegasman@thegasman.info

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