Diesel Production Cost, Types, and Price Dynamics

Diesel Explained with Types

Diesel is the term coined for distillate fuel oil, which is used in motor vehicles that use a compression ignition engine. It is a blend of hydrocarbons ranging from C10H20 to C15H28 that is obtained by the distillation of crude oil. It has several properties like cetane number (or cetane index), density, fuel volatility, low-temperature operability properties, viscosity, and sulfur content. It is a fuel refined from crude oil and biomass materials. It is also used to generate electricity in diesel-engine generators.

Petrodiesel is diesel derived from petroleum. The diesel has to be refined further to get rid of sulfur. At present, it is more common as a fuel than biodiesel; however, its use in medium or heavy trucks and buses is on the rise. Petro diesel is produced via the fractional distillation process, where crude oil gets boiled, and its components get split. Since diesel has a higher boiling point compared to gasoline, it splits from crude oil faster. This method lets refineries separate substances such as kerosene, diesel, and gasoline.

Biodiesel is made using biomass, like algae. It accounts for lower net emissions compared to Petro diesel since the carbon it emits is taken from the modern atmosphere when the biomass extends. In contrast, the carbon emitted by Petro diesel stays on the earth for millions of years.

Diesel Market Overview

Diesel has various advantages, like having greater torque, lower maintenance, and enhanced fuel economy, which is primarily driving the market’s growth. Moreover, diesel cars depreciate at a slower rate which makes them popular among consumers, further boosting its market demand. Furthermore, the fuel emits less carbon monoxide, which is better for the environment, thereby resulting in increased demand. Hence, owing to all these factors, the diesel industry is rapidly advancing.

Diesel Production Process via the Fractional Distillation Process

Diesel Production via Fractional Distillation: diesel is produced using the fractional distillation process from crude oil. During the process, crude oil’s fractional distillation is done at high temperature (generally 200-350 °C) and standard atmospheric pressure, finally yielding diesel.

Key Players in the Diesel Industry

  • Chevron Corporation
  • Robert Bosch GmbH
  • Ishtar Company LLC
  • PJSC Gazprom
  • Royal Dutch Shell Plc
  • Exxon Mobil Corporation
  • PetroChina Company Limited

Diesel Price Trend and Factors Effecting It

North America

In the North American region, prices of diesel fell throughout the final quarter of the previous year. A uniform decline in upstream crude oil prices lowered diesel production costs all through the quarter as a result of reduced demand from Asian importers. In the middle of last year, prices for diesel dropped remarkably because of a major drop in the American Truck Tonnage Index and hinted at lesser consumption. Additionally, the decline in production activities reduced consumer demand for fuel and offtakes and grew domestic inventories.

Asia

In China, prices of diesel fell consistently because of weak demand and bearish upstream Crude oil prices. In summer, the demand from China and southeast countries plunged in the Asian logistics segment as a result of reduced operational rates during summer based on regulations by the government. On the contrary, a stable price trend in India was seen due to bearish demand sentiments from consumers during the monsoon and slowed construction and logistic activities.

Europe

In Europe, an unstable price trend was noticed for diesel. At the start of the last quarter, the prices declined because of a drop in upstream crude oil prices. But, during the mid-quarter, there was a revival in the price trend, and prices soared due to high-priced crude oil imports from the US and an accompanying depreciation of nearly 6% of the Euro compared to the USD. By the near-end of the quarter, product prices fell due to reduced offtakes. Owing to the rising inflation, demand tumbled from the consumer end.

Hence, in the following Procurement Resource blog, it can be summarised that diesel is a crucial commodity powering automobiles which boosts its demand. Further, its sourcing requires the help of a leading industry expert like Procurement Resource, where our adept analysts help you through all the key processes related to sourcing, pricing, and procurement.