While it is probably best not to get us started on this subject, we thought it would be a good idea to publish our guidelines on how pricing is established.
For many years we sold our biodiesel for 3.50 a gallon. We did that when petroleum diesel was 1.59, 2.54, 3.36 etc. In a world that is generally quoted out four decimal places, in which prices change in the morning and again in the afternoon, we were content with never changing our price. We were simply 3.50.
3.50 works well and is a fair price, as long as petroleum diesel is less expensive. We don’t need to bore you with how we make a premium product, that is cleaner burning, is made in America from renewable sources and requires no war to be procured.
Rather, we would like to simply point out that our production is so small compared to consumption that whenever we price our product for less money than petroleum diesel we get wiped out in five minutes.
It’s that simple. There’s no need for sanctimonious hippy diatribes. Just hard cold supply and demand. We have to keep our product at a price that is higher than petroleum if we want to maintain fuel for our members.
Which means we occasionally move our price. What we do is check the website of the Energy Information Administration, and if petroleum diesel is markedly higher than us, we increase our price by .25 a gallon. If petroleum diesel falls back in price, we will too, as long as we can stay slightly higher than petroleum.
There are rare occasions when we might be slightly less money than petroleum, but that is largely because we hate changing the price. Here is a more detailed discussion of pricing–complete with a bunch of member comments and suggestions as to how price should be determined.
For an excellent look at the costs of biodiesel production, check out this obsolete presentation from our 2008 Annual Meeting. The data is out of date–but the logic is pristine, and the graph is wonderful.
If you want cheap fuel, that comes from Libya. Or Iraq. If you want the good stuff join us–but be prepared to pay more for your fuel.