|SPrior to 2008, we saw that distillate prices had begun to
show strength relative to gasoline.
But 2008 saw distillate rise to new highs relative to gasoline. U.S. refiners had never seen such strong
incentives to product more distillate and less gasoline.
|SIn 2008, strong international demand for diesel brought
about by economic growth in emerging countries, along with some unusual
circumstances created a very tight market.
|–A number of regions were experiencing high diesel demand
for electricity generation, such as in Latin America, where droughts
diminished hydropower, and natural gas supply
|–China also imported extra diesel, in part to provide
adequate supplies for the Olympics and substitute power after the large
|–And Europe needed extra ULSD in 2008 as well.
|SIn 2009, the strong market for diesel relative to gasoline
disappeared. Both are now weak. Gasoline demand has been affected less by
the recession, and its price now exceeds diesel price in the United States
and at times in Europe.