OPEC and the Price of Oil – March 15, 2009

OPEC and the Price of Oil – March 15, 2009

OPEC, at its meeting Sunday (March 15, 2009) in Vienna decided not to ask members to cut output any further. This decision will hold off any official changes until the next meeting in May.

As is normal for this group of market manipulators, they cannot agree on what to do or how to do it, so they create a press release that tries to convince the not too bright, that they are maintaining production levels to “help” with the worlds current economic problems.

Nothing could be further from reality or the truth. They did not cut production for a host of reasons, first and foremost is that many of their members are ignoring the previous reduction of 2.2 million barrels per day that supposedly took effect in December. Even by their numbers (which are far too generous) they are only getting 80% compliance from their members on those production limits.

Why you may ask are they unable to control production and force up prices? Well the biggest issue is that many of these OPEC Countries (Note: OPEC Countries theoretically control about 40% of the world’s oil) spend their petro-dollars as fast or even faster than they take them in. Venezuela needs oil to be about US$80.00 per barrel just to pay the bills.

Many of the Middle Eastern countries have gone on staggering spending sprees basically acting as socialist entities.

These countries temporarily import workers to do their dirty work, while their own citizens do less and less but keep getting ever growing government handouts to live on (this sounds vaguely like some western country I may have heard of).

They have spent hundreds of billions on infrastructure projects and other enticements to try and bring foreign businesses to their countries before the oil runs out (yes, it will run out).

However all of this has been based on cheap capital and the idea that oil would keep going up in price forever.

Well fast forward to today, There is more crude oil sitting in storage than at any time in history, the demand is off by more than 1 million barrels per day (Note: this is another manipulated number and the reality is that demand is off by two or even three times this number), the economy in the US and now the rest of the industrialized world is contracting and will likely do so for a year or more, before starting a slow, painful, and just plain ugly recovery, and it appears that there is at least a glimmer of hope that the world including the US will finally wake up and recognize that the way we have been using energy for the last 100 years is unsustainable and that we need to do things now, not is 20 years to fix the problems.

All of this leads me to some oversimplified conclusions on oil pricing over the next year or two. If there is reduced economic activity worldwide there will be less demand for oil. The oil inventories will likely continue to grow as OPEC and Russia will need to pump more and more to make up for the lower per barrel prices.

Right now there is a concerted effort to hold and try to push crude prices up. However to keep oil in storage costs a lot of money every day. At some point traders and speculators will decide that they cannot afford to pay $100,000.00 a day to park crude in a tanker because the price is not going up enough make it profitable. When this happens, we could see oil flood the markets at levels not seen since the 1970’s. This will then further exacerbate the problems of the oil producing countries who will try to pump even more.

Short of a war (not out of the question) or a cataclysmic natural disaster, it is hard to see crude oil going up significantly anytime soon.

Refiners and some marketers are likely to benefit as crude prices decline and more finished product becomes available. In some areas where there is tightly controlled distribution there may months or even years of high profitability due to reduction in cost followed more slowly by reduction in retail prices.

I have regrettably spent my life creating a carbon footprint of embarrassing proportions. I am now working on reducing not only my negative impact on the world, but on creating new and better ways for everyone to do the same without destroying their livelihoods or lifestyles.

Please join us in our efforts.

To read this and other articles on fuels, alternative fuels, oils, lubricants, and coolants, please go to: http://www.lcbamarketing.com/ and click on technical articles.

Please post your comments, thoughts, ideas, and suggestions here.

Diesel Doctor

Copyright 2009© - William Richards

Synthetic Oils - Are they Worth the Cost?

Synthetic Oils - Are they Worth the Cost?

Image courtesy of outboardmotoroilblog.com

Today we hear a lot of terms thrown around when discussing motor oils. Much of the time, they are being used incorrectly.

So let’s start with mineral oil, this is the oil most of us have used in one form or another since the internal combustion engine was created. Mineral oils are distilled from crude oil as part of the refining process.

There are three categories of mineral oils; Paraffinic, Naphthenic, and Aromatic. Mineral oil can be as simple as baby oil, or as complex as today’s heavy duty motor oils. The chemistry used to create multi-grade oils and pickup and hold contaminants in solution is extremely complex.

Synthetic – Synthetic Oils can be created from many different sources and can offer many helpful characteristics such as lower friction, better high temperature performance, better stability, better sheer stability, better cold start lubrication, reduced oxidation, improved protection against thermal breakdown, less tendency to form sludge, reduces evaporative loss, potentially extends drain intervals.

There are two main categories for synthetic oils the first is:

Polyalphaolefin (PAO) an American Petroleum Institute (API) Group IV Oil Base Oil

The second is:

Synthetic esters an API Group V Base Oils ((non-PAO) synthetics, including alkylated naphthalene’s, alkylated benzenes, diesters, polyolesters, polyglycols etc.)

There is also a category called Semi-Synthetics – a mixture of petroleum and up to 30% synthetic base oils. The name Semi-Synthetic is a misnomer, oils are either Synthetic or not. If they are a mixture then if you subscribe to the theory that a chain is only as strong as its weakest link applies and the mixture will only be as good as worst performing part of the mineral oil.

The primary reasons to change motor oil are because the oil gets dirty and or because the additive package in the oil gets used up. Dirty can mean physical dirt from the environment, soot from combustion, left over combustion products and a nearly endless list of contaminants.

The additive package provides friction reduction, neutralizes acids, holds contaminants in solution, prevents oxidation, prevents corrosion, and many other vital functions. The additives are consumed or used up over time and they need to be replenished or failure will result. The method most often used is to replace the oil. This method has the advantage of taking many or hopefully most of the contaminants out of the engine with it.

Synthetic Oils may or may not have super additive packages, but eventually the oil becomes dirty to the point that it needs to be filtered or replaced and the additive package replenished or again replaced. The problem is that synthetic oil becomes contaminated long before it is “worn out” and has to be replaced to prevent damage from the contaminants. This means that often you are unable to take full advantage of the superior chemistry and characteristics of synthetic oils.

When this happens the cost disadvantage of the synthetics outweigh its other advantages.

In situations of extreme cold, high heat, high loads, extended operation at high rpm, and other related situations synthetic oils offer many superior characteristics that may improve operability, increase engine life, provide better fuel economy, and potentially improve emissions.

However for the average grocery getter or most vehicles in normal operation the added cost of synthetic motor oil is probably not justified.

View all of the Fuel School articles at: www.lcbamarketing.com and click on Technical Articles

Please post your comments, thoughts, ideas, and suggestions.

Diesel Doctor

Copyright 2009© - William Richards

Cetane Number – What it is and Why it’s so Important

Cetane Number – What it is and Why it’s so Important

Cooperative Fuel Research Engine (CFR)

Cetane is a measurement of a diesel fuel ignition and or combustion quality. This Cetane Number or CN is one of several components that determine the quality of diesel and biodiesel fuels. This number is used for light and middle distillate fuels. For heavy (residual) fuels Calculated Ignition Index (CII) and Calculated Carbon Aromaticity Index (CCAI) are used.

In some ways this measurement is similar to the Octane Ratings given to gasoline. In its simplest terms Cetane Number measures the delay between the start of fuel injection into the combustion chamber and the beginning of compression ignition (Auto-ignition).

In medium and high speed diesel engines (this all automotive and truck engines) fuel needs to have a CN between 38 and 55 to operate. In general the higher the CN number, the better for the engine and for emissions. However raising CN above 55 currently offers little if any benefit.

In the US the group setting the standards for CN is the American Society for Testing of Materials (ASTM) and currently the minimum is 40. While diesel engines will start and run with 40 CN fuel, they do not run as efficiently as they will at a higher number.

In Europe the European Union (EU) has systematically over several years raised the minimum from 38 to the current 51. This has allowed engine manufacturers to produce more efficient engines with lower emissions and better economy. Most fuel in the EU has a CN of 55 or even better.

Cetane Number is measured using a very expensive and arcane Cooperative Fuel Research (CFR) engine and a process that very complex.

You can also measure CN using an Ignition Quality Tester (IQT) which is somewhat less complex, but still quite costly.

There is a third measurement called Cetane Index (CI) that measures density and distillation range of the fuel and through a calculation provides a measurement. This method will calculate a reasonably accurate number for the refined diesel.

The problem is that today most diesel fuel uses additives to reach the desired Cetane Number and additives do not affect the density, thus the CI of a fuel containing additives is not accurate.

Some of you may have seen a device that looks like a battery fluid tester (a hydrometer). These devices are not capable of determining CN or CI with any accuracy.

You can raise CN by altering the refining process or through the use of Alkyl nitrates or di-tert-butyl peroxide additives. NOTE: Remember that additives do not raise CI.

Also, biodiesel, depending on the base oil from which it is derived has a natural Cetane Rating of 46 to as high as 60.

With the advent of Pilot or Multiple Pulse fuel injection, Cetane Number becomes more important than ever. The delay in auto-ignition (CN) affects the combustion timing, which has a significant effect on power output, fuel economy, and emissions.

Raising Cetane Number together with Improving Fuel Atomization is the fastest way to improve fuel economy and reduce emissions through the use of correctly formulated additives.

Please post your comments, ideas, and suggestions

More information at: http://www.lcbamarketing.com/ - Click on Fuel School Articles.

Diesel Doctor

Copyright 2009© - William Richards

Relying on Reliance – Rather than Relying on Ourselves

Relying on Reliance – Rather than Relying on Ourselves

Reliance Industries Ltd. an Indian company is preparing to startup its second huge refinery in Jamnagar in Western India. Reliance is already operating a 660,000 barrel per day (bpd) refinery there that together with the new 580,000 bpd unit creates the world’s largest refining complex, a 1.24 million barrel per day monster that is going to have a major effect on refined fuel prices around the world.

The new unit has been built strictly for exporting finished product, primarily gasoline, diesel and Jet A. This unit has been built specifically to produce fuel for the US market. It can meet all of the current and proposed fuel standards that the EPA has created.
Reliance has leased 935,000 barrels of storage space at Hess’s Port Reading terminal and has opened a trading office in Houston.

They will very quickly become a major force in the US marketplace. While in the short term this will likely drive prices at the pump down, the long term effect while be negative.
Over the last few years we have heard time and time again how much the major oil companies have been earning in profits, billions every quarter. However they have invested precious little of this windfall in infrastructure here or abroad.

The US cannot refine all the fuel we use, so others are doing it for us. In every way this is a bad idea and we will suffer for it later. The irresponsibility of not investing in refinery capacity, storage, pipelines, and other required projects is leading us into a mess our children and grandchildren will suffer for.

In eastern Canada, Irving Oil is making a 300,000 bpd expansion to its Saint John’s New Brunswick refinery to provide finished product for the northeastern US markets and now India will add 580,000 bpd to this amount. Again while this may temporarily lower pump prices, it is a strategic mistake to outsource the refining of our fuels.

We are sending more money overseas for no other reason than it is easier than dealing with our problems here.

Another part of the problem is the whole NIMBY (Not In My Back Yard) theory. We don’t build refineries because we don’t want to see or smell them.

Well it is time that we grow up, and either put new refineries where they won’t bother anyone or we need to figure out how to clean them up enough that we can live with them.

It is not bad enough that we have to import 2/3’s of our crude oil to support our addiction, and then we import another 10% of our total usage in the form of finished product. Apparently we don’t even want to make the money and have the jobs that we should get from refining it.

The idea that we in the US have so much money that we can afford to simply let someone else deal with our problems while sending them boatloads of money is shortsighted and frankly, stupid!

For more on this and other fuel related subjects go to: http://www.lcbamarketing.com and click on Fuel School Articles

Diesel Doctor

Copyright 2009© - William Richards