Diesel in Europe is a better grade than what is sold in the U.S. Euro standards call for sulphur levels half of what is required here, which increases production costs.
Euro diesel sulphur requirements are getting more stringent, either this year or next year. I forget which.
I'll have to dig the breakdown up again.
Things are going to get much tighter here in the coming years, and even the oil industry doesn't exactly know what is going to happen. Diesel sulfur is going to drop to 7 ppm leaving the refinery, and can only increase to 15 ppm by the time it leaves the retailer's tank. This has been a major challenge for the oil industry since current highway "lower sulfur" diesel is about 500 ppm, but the downstream distribution channel is in for an even greater challenge.
Petroleum products are shipped in pipelines, tanker trucks, barges, etc. You ship multiple products using the same infrastructure, and some products may have sulfur levels of several thousand ppm. The ability to cross contaminate this diesel above 15 ppm is not that hard, and the impact of that results in damage to the next generation of pollution control equipment pretty quickly. (Who says the oil industry is all powerful? The automakers kicked the industry’s bellybutton on this requirement, making clean air a “fuel” problem for diesel instead of finding a better emission technology). This of course creates liability issues, and the likelihood that somebody has to eat the cost of diesel that is contaminated above 15 ppm (but nobody knows who yet). These issues have to be worked out. Various off road diesel dynamics and phase in periods issues (some regions and small refiners can carry and produce the 500 ppm for a longer period than other for hardship reasons) further complicate matters by having maybe 6 grades (as I remember off the top of my head) of diesel total. That means marketers will likely carry what’s easier, safer and in the most local demand at the expense of others.
The end result is that most refineries will likely have made the investments to produce the new ultra low sulfur diesel. But, many terminals and bulk plants may not carry it, and some may close. The base price will certainly be higher by some percentage, but supply volatility price increases and general availability of the appropriate diesel for the appropriate engine in all markets is far from certain. Might not be an issue, or could be a total mess in about 2006. Fortunately, Iraqi crude is low sulfur crude
Charon
Here’s a detailed analysis:
http://www.nacsonline.com/NR/exeres/2E275E2B-AE24-4CEB-AFC6-1DD2A1E4099C.htm
