FT138: “High gas prices mean high food prices.” —Old Pithy

Posted by PITHOCRATES - October 5th, 2012

Fundamental Truth

We use Diesel Fuel in our Ships, Trains and Trucks to move Food from the Farm to the Grocery Store

People don’t like high gas prices.  When the price at the pump goes up more of our paycheck goes into the gas tank.  Or, more precisely, in everyone’s gas tanks.  For even if you don’t drive a car when gas prices go up you’re putting more of your paycheck into the gas tanks of others.  Thanks to oil being the lifeblood of our economy.  And unless you’re completely self-sufficient (growing your own food, making your own clothes, etc.) everything you buy consumed some petroleum oil somewhere before reaching you.

Gas prices go up for a variety of reasons.  The purely economic reason is the market forces of supply and demand.  When gas prices rise it’s because demand for gasoline is greater than the supply of gasoline.  Which means our refineries aren’t producing enough gasoline to meet demand.  And the purely economic reason for that is that they are not refining enough crude oil.  Meaning the low supply of gasoline is due to the low supply of crude oil.  Which brings us to how high gasoline prices consume more of our paychecks even if we don’t drive.  The reason being that we just don’t make gasoline out of crude oil.  We also make diesel fuel.

Diesel fuel is a remarkable refined product.  It just has so much energy in it.  And we can compress an air-fuel mixture of it to a very small volume.  Put the two together and you get a long and powerful power stroke.  Making the diesel engine the engine of choice for our heavy moving.  We use it in the ships that cross the ocean.  In the trains that cross our continents.  And in the trucks that bring everything to where we can buy them.  To the grocery stores.  The department stores.  To the restaurants.  Everything in the economy that we don’t make for ourselves travels on diesel fuel.  Which is why when gas prices go up diesel fuel prices go up.  Because of the low supply of oil going to our refineries to refine these products.

Oil is at a Disadvantage when it comes to Inflation because you just can’t Hide the Affects of Inflation in the Price of Oil

And there are other things that raise the price of gasoline.  That aren’t purely economical.  But more political.  Such as restrictions on domestic oil drilling.  Which reduces domestic supplies of crude oil.  Political opposition to new pipelines.  Which reduces Canadian supplies of crude oil.  Special ‘summer’ blends of gasoline to reduce emissions that tax a refinery’s production capacity.  As well as our pipeline distribution network.  Higher gasoline taxes.  To pay for roads and bridges.  And to battle emissions.  The ethanol mandate to use corn for fuel instead of food.  Again, to battle emissions.  All of which makes it more difficult to bring more crude oil to our refineries.  And more difficult for our refineries to make gasoline.  Which all go to adding costs into the system.  Raising the price at the pump.  Consuming more of our paychecks.  No matter who is buying it.

Then there is another factor increasing the price at the pump.  Inflation.  When the government tries to stimulate economic activity by lowering interest rates they do that by expanding the money supply.  So money is cheaper to borrow because there is so much more of it to borrow.  Hence the lower interest rates.  However, expanding the money supply also causes inflation.  And devalues the dollar.  As more dollars are now chasing the same amount of goods and services in the economy.  So it takes more of them to buy the same things they once did.  One of the harder hit commodities is oil.  Because we price oil on the world market in U.S. dollars.  So when you devalue the dollar it takes more of them to buy the same amount of oil they once bought.

Oil is at a particular disadvantage when it comes to inflation.  Because you just can’t hide the affects of inflation in the price of oil.  Or the gas we make from it.  Unlike you can with laundry detergent, potato chips, cereal, candy bars, toilet paper, etc.  Where the manufacturer can reduce the packaging or portion size.  Allowing them not to raise prices to reflect the full impact inflation.  They still increase the unit price to reflect the rise in the general price level.  But by selling smaller quantities and portions their prices still look affordable.  This is a privilege the oil industry just doesn’t have.  They price crude oil by a fixed quantity (barrel).  And sell gasoline by a fixed quantity (gallon).  So they have no choice but to reflect the full impact of inflation in these prices.  Which is why there is more anger about high gas prices than almost any other commodity.

Perhaps we can lay the Greatest Blame for the Current Economic Malaise on the Government’s Inflationary Monetary Policies

Current gas prices are hitting record highs.  And this during the worse economic recovery following the worst recession since the Great Depression.  Gas prices and the unemployment rate are typically inversely related to each other.  When there is high unemployment people are buying less gasoline.  This excess gasoline supply results in lower gas prices.  When there is low unemployment people are buying more gasoline.  This excess demand for gasoline results in higher gas prices.  These are the normal affects of supply and demand.  So the current high gas prices have little to do to with normal economic forces.  Which leaves government policies to explain why gas prices are so high.

Environmental concerns have greatly increased regulatory policy.  Increasing regulatory compliance costs.  Which has greatly discouraged the building of new refineries.  And making it very difficult to build new pipelines.  Which tax current pipeline and refinery capacities.  A problem mitigated only with their restriction on domestic oil production.  The current administration has pretty much shut down oil exploration and production on all federal lands.  Reducing crude oil supplies to refineries.  These environmental policies would send gas prices soaring if the economy was booming.  But the economy is not booming.  In fact the U-6 unemployment rate (which counts everyone who can’t find a full time job) held steady at 14.7% in September.  So an overheated economy is not the reason we have high gas prices.  But the high gas prices may be part of the reason we have such high unemployment.

Perhaps we can lay the greatest blame for the current economic malaise on the government’s inflationary monetary policies.  Inflation increases prices.  Especially those things sold in fixed quantities priced in dollars.  Like oil.  And gasoline.  The price inflation in refined oil products is like a virus that spreads throughout the economy.  Because everyone uses energy.  Especially the food industry.  From the farmers driving their tractor to work their fields.  To the trucks that take grain to rail terminals.  To the trains that transport this grain to food processing plants.  To the trucks that deliver these food products to our grocery stores.  From the moment farmers first turn over their soil in spring to the truck backing into to a grocery store’s loading dock to consumers bringing home groceries in their car to put food on the table fuel is consumed everywhere.  Which is why when gasoline prices go up food prices go up.  Because we refine gasoline from the same crude oil we refine diesel fuel from.  Oil.  Creating a direct link between our energy policy and the price of food.

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Kerosene, Jet Fuel, Lockheed Constellation, Boeing 707, Boeing 747-400, Newton’s Third Law of Motion, Turbojet and Fan Jet

Posted by PITHOCRATES - October 3rd, 2012

Technology 101

The only way to make Flying Available to the General Public is to put as many People as Possible on an Airplane

Refined petroleum products have made our lives better.  We have gasoline to drive wherever we want.  We have diesel fuel to transport things on ships and trains like petroleum oil, iron ore, coal, food, medicine, smartphones, coffee, tea, wine, scotch whisky, bourbon whiskey, beer, fresh fish, sushi, etc.  Pretty much everything we buy at a store or a restaurant got there on something powered by diesel fuel.  And sometimes kerosene.  If it must travel fast.  And if it does then it finds itself on a jet aircraft.

Today aviation has shrunk the world.  We can order a new smartphone sitting on a shelf in California and have it the next day in New York.  We can even travel to distant countries.  Some in the time of a typical working day.  Some a half a day or longer.  When but a 100 years earlier it took a couple of weeks to cross the Atlantic Ocean.  While 200 years ago it took a couple of months.  We can travel anywhere.  And get there quickly.  Thanks to the jumbo jet.  And not just the super-rich.  Pretty much anyone today can afford to buy a plane ticket to travel anywhere in the world.  And one thing makes this possible.  The jet engine.

Airplanes are expensive.  So are airports, air traffic control and jet fuel.  Airlines pay for all of these costs one passenger at a time.  Their largest cost is their fuel cost.  The longer the flight the greater the cost.  So the only way to make flying available to the general public is to put as many people as possible on an airplane.  Dividing the total flying cost by the number of passengers on the airplane.  This is why we fly on jumbo jets for these longer flights.  Because there are more people to split the total costs.  Lowering the cost per ticket.  Before the jet engine, though, it was a different story.

The Boeing 747-400 can take up to 660 Passengers some 7,260 Miles at a Speed of 567 MPH

One of the last intercontinental propeller-driven airplanes was the Lockheed Constellation.  A plane with four (4) Wright R-3350-DA3 Turbo Compound 18-cylinder supercharged radial engines putting out 3,250 horsepower each.  Which is a lot considering today’s typical 6-cyclinder automobile engine is lucky to get 300 horsepower.  No, the horsepower of one of these engines is about what one modern diesel-electric locomotive produces.  So these are big engines.  With a total power equal to about four locomotives lashed up.  Which is a lot of power.  And what does that power allow the Constellation do?  Not much by today’s standards.

In its day the Lockheed Constellation was a technological wonder.  It could take up to 109 passengers some 5,500 miles at a speed of 340 mph.  No bus or train could match this.  Not to mention it could fly over the water.  Then came the age of the jet.  The Boeing 707 being the first largely successful commercial jetliner.  Which could take up to 189 passengers some 6,160 miles at a speed of 607 mph.  That’s 73.4% more passengers, a 78.5% faster speed and a 14.1% longer range.  Which is an incredible improvement over the Constellation.  But nothing compared to the Boeing 747-400.  Which can take up to 660 passengers (506% more than the Constellation and 249% more than the 707) some 7,260 miles at a speed of 567 mph.

Now remember, fuel is the greatest cost of aviation.  So let’s assume that a intercontinental flight costs a total of $75,000 for each plane flying the same route.  Dividing that cost by the number of passengers you get a ticket price of approximately $688, $397 and $114 for the Constellation, the 707 and the 747-400, respectively.  So you can see the advantage of packing in as many passengers as possible into an airplane to lower the cost of flying.  Which is why the jumbo jets fly the longest routes that consume the most fuel.  And why we no longer fly propeller-driven aircraft except on short routes to airports with short runways.  These engines just don’t have the power to get a plane off the ground with enough people to reduce the cost of flying to a price most people could afford.  Only the jet engine has that kind of power.

The Fan Jet is basically a Turbojet with a Large Fan in front of the Compressor

Newton’s Third Law of Motion states that for every action there is an equal and opposite reaction.  Think of a balloon you just blew up and are holding closed.  If you release your hold air will exit the balloon in one direction.  And the balloon will move in the opposite direction.  This is how a jet engine moves an aircraft.  Hot exhaust gases exit the engine in one direction.  Pushing the jet engine in the opposite direction.  And because the jet engines move the plane moves.  With the force of the jet engines transferred via their connection points to the aircraft.  The greater the speed of the gas exiting the jet the faster it will push a plane forward.

The jet engine gets that power from the continuous cycle of the jet engine.  Air enters one end, gets compressed, enters a combustion chamber, mixes with fuel (kerosene), ignites, expands rapidly and exits the other end.  The hot (3,632 degree Fahrenheit) and expanding gases pass through and spin a turbine.  Then exit the engine.  The turbine is connected to the compressor at the front of the engine.  So the exhaust gases spin the compressor that sucks air into the engine.  As the air passes through the compressor it compresses and heats up.  Then it enters the combustion chamber and joins fuel that is injected and burned continuously.  Sort of like pouring gas on a burning fire.  Only enormous amounts of compressed air and kerosene are poured onto a burning fire.  As this air-fuel mixture burns it rapidly expands.  And exits the combustion chamber faster than the air entered it.  And shoots a hot stream of jet gas out the tail pipe.  Which produces the loud noise of these turbojets.  This fast jet of air cuts through the surrounding air.  Resulting in a shear effect.  Which the next generation of jet engines, the fan jet, greatly reduces.

The fan jet is basically a turbojet with one additional feature.  A large fan in front of the compressor.  These are the big engines you see on the jumbo jets.  They add another turbine inside the jet that spins the fan at the front of the engine.  Which feeds some air into the compressor of what is basically a turbojet.  But a lot of the air this fan sucks in bypasses the turbojet core.  And blows directly out the back of the fan at high speed.  In fact, this bypass air provides about 75% of the total thrust of the fan jet.  Acting more like a propeller than a jet.  And as an added benefit this bypass air surrounds the faster exhaust of the jet thereby lessening the shear effect.  Making these larger engines pretty quiet.  In fact a DC-9, an MD-80, a 707 or a 727 with standard turbojets are much louder than a 747 with 4 fan jets at full power.  They’re quieter.  And they can push a lot more people through the air at incredible speeds over great distances at a reasonable price per passenger than any other aircraft engine.

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Carbon, Carbon Cycle, Crude Oil, Petroleum, Hydrocarbons, Oil Refinery, Cracking, Sweet Crude, Sour Crude, Gasoline and Diesel Engines

Posted by PITHOCRATES - April 25th, 2012

Technology 101

Crude Oil is made from Long Chains of Carbon Atoms Bonded Together with a lot of Hydrogen Atoms Attached Along the Way

Carbon.  It’s everywhere.  And in everything.  Like all matter it cannot be created.  Or destroyed.  It just changes.  As it creates the circle of life.  The carbon cycle.  Plants and trees absorb carbon out of the atmosphere.  And converts it into biomass.  Into wood.  And into animal food.  Where the digestive system converts it into carbon-based living flesh and blood.  That exhales carbon.  Plants absorb carbon and release oxygen.  Plants can’t grow without carbon.  And we can’t breathe without plants growing.  Carbon is constantly changing.  But never created.  Or destroyed.  From diamonds to pencils.  From sugar to carbonated soda.  From plastics to human beings.  It’s everywhere.  And everything.  Why, it’s life itself.

Carbon is a time traveler.  Carbon that once traveled through the atmosphere disappeared millions of years ago.  Buried underneath the surface of the earth.  Under intense heat and pressure.  Plankton and algae and other biomasses decayed until there was almost nothing left but carbon atoms.  Long chains of carbon atoms.  Forming great, restless pools of black goo beneath the surface.   Waiting for the modern world to arrive.  Waiting for the internal combustion engine.  The jet engine.  And plastics.  When they could be reborn.  And see the light of day again.

Crude oil.  Petroleum.  Black gold.  Texas tea.  Hydrocarbons.  Long chains of carbon atoms bonded together with a lot of hydrogen atoms attached along the way.  In the ground they’re mostly long chains.  When we get them above ground we can break those chains into different lengths.  And create many different things.  C16H34 (hexadecane).  C9H20 (nonane).  C8H18 (octane).  C7H16 (heptane).  C5H12 (pentane).  C4H10 (butane).  C6H6 (benzene).  CH4 (methane).  Some of these you may be familiar with.  Some you may not.  Methane is a flammable gas.  Hydrocarbon chains from pentane to octane make gasoline.  Hydrocarbon chains from nonane to hexadecane make diesel fuel, kerosene and jet fuel.  Chains with more carbon atoms make lubricants.  Chains with even more carbon atoms make asphalt.  While chains with 4 carbon atoms or less make gases.  All these things made from the same black goo.  A true marvel of Mother Nature.  Or God.  Depending on your inclination.

Older Coastal Refineries make more Expensive Gasoline than the Newer Refineries due to the Availability of Sweet versus Sour Crude

Another great carbon-based product it bourbon.  Made from a corn sour mash.  We heat this and the alcohol in it boils off.  That is, we distill it.  We run this gas through a coiling coil and it condenses back into a liquid.  And after a few more steps we get delicious bourbon whiskey.  Distilleries give tours.  If you get a chance you should take one.  You won’t get to sample any of the distilled spirits (insurance reasons).  But you will get a feel for what an oil refinery is.

An oil refinery works on the same principles.  Boil and condense.  And cracking.  Cracking those long hydrocarbon chains apart into all those different chains.  Long and small.  Into liquids and gases.  Even solid lubricants and asphalt.  All made possible because of their different boiling points.  The gases having lower boiling points.  The solids having higher boiling points.  And the liquids having boiling points somewhere in between.

Refineries are complex processing plants.  Not only because of all those different hydrocarbon chains.  But because of the crude oil introduced to these plants.  For there is light sweet crude.  And heavier sour crude.  The difference being the additional stuff that we need to remove.  Such as sulfur.  An environmental problem.  So we have to remove as much of it as possible during the refining process to meet EPA standards.  The sweet crudes are lower in sulfur.  Making them the crude of choice.  But this has also been the most popular crude through the years.  So its resources are dwindling.  Making it more expensive.  As are all the products refined from it.  Especially gasoline.  The more sour crudes have higher sulfur content.  And require more refining steps to remove that sulfur.  Which means additional refinery equipment.  So the older refineries that were refining the light sweet crude can’t refine the heavier sour crudes.  Which is why the refineries along the coasts make more expensive gasoline than the newer ones in the interior refining the heavier sour crudes.  Due to the availability of sweet crude versus sour crude.

The Modern World is brought to us by a Complex Economy which is brought to us by Petroleum

One of the main uses of refined crude oil is fuel for internal combustion engines.  In particular, gasoline engines and diesel engines.  Which are very similar.  The difference being the mode of ignition.  And, of course, the fuel.  Gasoline engines compress an air-fuel mixture in the cylinder.  At the top of the compression stroke a spark plug ignites this highly compressed and heated mixture.  Sending the piston down.  If the combustion occurs too early it could place undo stresses on the piston connecting rods and the crank shaft.  By trying to send the piston down when it was coming up.  Causing a knocking sound.  Which is a bad sound to hear.  And if you hear it you should probably make sure you’re using the right gasoline.  If you are you need to have you car serviced.  Because continued knocking may break something.  And if it does your engine will work no more.  So this is where octane comes in the blending of gasoline.  It’s expensive.  But the more of it in gasoline the higher the compression you can have.  And the less knocking.  Which is its only purpose.  It doesn’t give you any more power.  The higher compression does.  Which the higher octane allows.  Using the higher octane gas in a standard compression engine won’t do anything but waste your hard earned money.

And speaking of higher compression engines, that brings us to diesel engines.  Which are similar to gasoline engines only they operate under a higher compression.  And don’t use spark plugs.  These engines compress air only.  Which allows the higher compression without pre-ignition.  At the top of their compression stroke a fuel injector squirts diesel fuel into the hot compressed air where it combusts on contact.  Diesel fuel has a higher energy content than gasoline.  Meaning for the same volume of fuel diesel can take you further than gasoline.  Which is why trucks, locomotives and ships use diesel.  But diesel tends to pollute more.  The smell and the soot kept diesel out of our cars for a long time.  As well as the difficulty of starting in cold climates.  Advanced computer controlled systems have helped, though, and we’re seeing more diesel used in cars now.

The modern world is brought to us by a complex economy.  Where goods and raw materials traverse the globe.  To feed our industries.  And to ship our finished goods.  Which we put on trucks, trains, ships and airplanes.  None of which would be possible without a portable, stable, energy-dense fuel.  That only refined petroleum can give us.  It’s better than animal power.  Water power.  Wind power.  Or steam power.  For there is nothing that we can use in our trucks, trains, ships and airplanes other than refined petroleum products today that wouldn’t be a step backwards in our modern world.  Nothing.  Making petroleum truly a marvel of Mother Nature.  Or God.  Depending on your inclination.

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