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Gas Cost Analysis for Power Generation

Introduction

The efficient process of power generation is reliant on the choice of fuel and its cost. The world economy changes rapidly under the influence of multiple factors, fuel costs being one of the most significant determinants. In the field of gas and oil, the costs of oil predetermine the changes in fuel prices. Therefore, it is required to identify the most cost-efficient fuel type among crude oil, natural gas, and diesel that would meet the needs and comply with the minimum budget capacity. To identify the cheapest fuel as a source of energy for power generation, one should conduct an informed cost analysis based on the recent data. The comparison of costs for the fuel options with regards to price margins depending on influential variables will allow for concluding as per the most cost-effective fuel.

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Firstly, the prices for liquefied natural gas differ from region to region. However, the average U. S. price for a diesel gallon equivalent is $2.66. The prices vary from $2.46 per diesel gallon equivalent in Gulf Coast and Rocky Mountain to $2.79 per diesel gallon equivalent in the West Coast region (U. S. Department of Energy, 2018, p. 10). Overall, the cost of liquefied natural gas is efficient given the benefits of this type of fuel for the environment and the energy production capacity.

Secondly, the diesel prices also vary depending on geographical location. According to the U. S. Department of Energy (2018), the national average cost for a gallon of diesel is $2.96, varying from 2.61 on Gulf Coast to $3.49 on West Coast (p. 10). However, as informed by the statistical data concerning the tendencies in cost changes for fuel, diesel prices are expected to grow in the future. The information from 2019 indicates that the price for a gallon of diesel varies around $3 and rises (“Gasoline, diesel, and crude oil prices,” n. d.). Therefore, diesel is more expensive than liquefied natural gas.

Thirdly, the utilization of crude oil as a fuel for power generation presents several opportunities. The costs for crude oil in 2020 are estimated at around $1.27 per gallon (American Petroleum Institute, 2020). However, the prices for crude oil tend to vary frequently and reach the point of $2.3 per gallon. Nonetheless, this type of fuel is the cheapest one to use in power generation in comparison to liquefied natural gas and diesel. The costs for fuel incorporate approximately 12% refining costs, 18% transportation and retail, 17% excise taxes, and 53% crude oil (“Gasoline, diesel, and crude oil prices,” n. d.). Therefore, since crude oil is the most influential constituent in forming the price for gas and diesel, it is more cost-efficient to use crude oil.

Conclusion

In summation, based on the conducted cost analysis for gas, diesel, and crude oil, the conclusions as per the cheapest fuel might be made. On average, the cost of liquefied natural gas is $2.66 per gallon, the diesel price is $2.96 per gallon, and crude oil is $1.27 per gallon. These price indicators might vary from region to region, but the general tendency is consistent. Thus, it is recommended to use crude oil as the fuel for power generation since it is the cheapest energy source compared to liquid gas and diesel.

References

American Petroleum Institute. (2020). U.S. gasoline and distillate fuels update [PDF file]. Web.

Gasoline, diesel and crude oil prices. (n. d.). 2020, Web.

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U. S. Department of Energy. (2018). Clean cities: Alternative fuel price report [PDF file]. Web.

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StudyCorgi. (2022, March 28). Gas Cost Analysis for Power Generation. Retrieved from https://studycorgi.com/gas-cost-analysis-for-power-generation/

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StudyCorgi. 2022. "Gas Cost Analysis for Power Generation." March 28, 2022. https://studycorgi.com/gas-cost-analysis-for-power-generation/.

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StudyCorgi. (2022) 'Gas Cost Analysis for Power Generation'. 28 March.

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