US oil falls below $50 a barrel

Do you believe that the t-shirt on your back is worth the $30 you paid for it? Do you think the store that sold it to you paid more than $15 for it? Do you think that the distributor that sold it to the store paid more than $7.50 for it? Do you believe the factory that it came from paid more than $3.75 to make it?

Here's a little bit of information, do as you please with it. When you refine gasoline, generally you use 2 methods; either a catalytic cracking unit, be it a side by side Cat or an up and down Cat (there's only a handful of these left in the world as they are susceptible to exploding)-further processing is necessary, but this is the brunt of the work; or a naphtha unifier. Now, a Cat is a very interesting process, basically you take a gas oil (think kerosene) and break it into shorter chain hydrocarbon (Naphtha's ie: gasoline for the layman). These units basically print money. They do nothing but make cash by taking a less desirable hydrocarbon and making gasoline. The second type, the unifier that makes gasoline has an interesting byproduct. When you remove cyclic chains (think benzene) from the hydrocarbon you get this thing called hydrogen as a byproduct. Now, hydrogen is a valuable asset in refining, because when you make diesel, you actually consume hydrogen. So, even if every other variable were the same- that is, temperature (cost in fuel gas), catalyst (not the same, but for ease we will say it is-usually a platinum ($$$) type), and pressure of the unit (this requires money for running a compressor), you can see that the cost of hydrogen alone is where SOME of the difference in price is between gas and diesel. Now, the only difference between 10 years ago and now is how "pure" the diesel needs to be. The more sulfur you need to remove the higher the cost. Removing sulfur requires 1 or all of the following variables to change: 1. You need better catalyst 2. You require more heat prior to putting it through a reactor (which in turn spends the catalyst faster and is harder on equipment- you need to use a higher chrome content pipe when you reach certain temperatures). 3. You need to strip the product harder which means you require more heat and more reflux at the end of the process to remove the free sulfur from the diesel before it can be sold.

Pretty simple when you really boil it down. There is a lot more to it, but I believe that's enough detail to give you an idea of SOME of what really is going on. :P

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