Oil Price ‘Gouging’: A Phantom Menace? - New York Times
Oil Price ‘Gouging’: A Phantom Menace? - New York Times
Review this and post summary of refining costs to produce gasoline from oil.
Joe,
As you know, I have not been a 'real' chemical engineer in years, but my senior design project was desulphurization of naptha (taking sulphur out of oil before it becomes gasoline). I have no affiliation with any oil companies. I don't even own any oil company stock. But,because I understand the industry, and I like to annoy people, I thought I would weigh in on the gasoline price issue with a different viewpoint.
Gasoline prices will never, ever be $2.00 per gallon again in our lifetime. Period. Not gonna happen, don't even think about it.
Here's what I know that most people don't.
How many gallons are in a barrel of oil? There are 42 US gallons in a barrel of oil.
What is the price of oil, as imported into the United States? In the past year, crude (unrefined) oil prices have been been between $80 and $61 per barrel in the past year. In May 2007, it is down to $61/bbl.
This means that the raw material for gasoline costs between $1.45 and $1.90 per gallon. This is before it is imported and shipped to the refineries.
Next, you have to add taxes. State and Federal. As of March 2007, the national average was $0.27 and $0.45 per gallon respectively, so the current US average cost for raw material and taxes are now between $2.17 and $2.62 per gallon.
...and we haven't even refined the oil into gasoline yet! To refine the oil, we have to heat it (energy costs), 'crack' it (break it into various components in a distillation column), and whip a little technology into it so it meets local, state, and federal emissions and production standards (additives, blend for octane, etc). There are also transportation costs for shipping from regional refineries to your local station. There is also a large, national network of oil pipelines (East and West coast and Alaska) that must be maintained. And don't forget your local gas station - they need to make a profit as well (typically under $0.10 per gallon).
NOTE: Due to the lower densities of many petroleum products, a 42-gallon barrel of crude oil can generate roughly 44 gallons of petroleum products. About 20 gallons of gasoline and 7 gallons of diesel are produced from each barrel of crude oil. Also, the generally accepted energy yield for refining operations is 10% - it takes the energy of one barrel of oil to refine ten barrels of oil.
References: http://genomicsgtl.energy.gov/biofuels/transportation.shtml
If I wanted to play with the numbers, I could now state that each barrel of gasoline produces 27 gallons of fuel (20 gallons of gasoline and 7 gallons of diesel), so my net cost per gallon of fuel is between $2.26 and $2.96. With a $3.00 per gallon price at the pump, this would yield a retail profit of $0.74 to $0.04 per gallon, but this is an artificial number because oil companies squeeze everything they can out of a barrel of oil and they produce everything from fuel to tar out of each barrel.
The current, national, retail price for gasoline is currently under $3.00 per gallon, so in round numbers, the Big, Nasty Oil companies are RIPPING US OFF because we are paying between $0.83 and $0.38 per gallon over the raw material costs.
We can criticize the oil companies for making HUGE profits, but the only reason they made record profits is because gasoline consumption is at record levels. The record profits also also amounted to less than 15% growth, but that's another story you won't hear on Fox News.
I also believe that most people have not taken the time to take a critical look at the US Energy Policy (oh, wait, we don't have one!) and figure out where we need to be to reduce our dependence on fossil fuels.
Review this and post summary of refining costs to produce gasoline from oil.
Joe,
As you know, I have not been a 'real' chemical engineer in years, but my senior design project was desulphurization of naptha (taking sulphur out of oil before it becomes gasoline). I have no affiliation with any oil companies. I don't even own any oil company stock. But,because I understand the industry, and I like to annoy people, I thought I would weigh in on the gasoline price issue with a different viewpoint.
Gasoline prices will never, ever be $2.00 per gallon again in our lifetime. Period. Not gonna happen, don't even think about it.
Here's what I know that most people don't.
How many gallons are in a barrel of oil? There are 42 US gallons in a barrel of oil.
What is the price of oil, as imported into the United States? In the past year, crude (unrefined) oil prices have been been between $80 and $61 per barrel in the past year. In May 2007, it is down to $61/bbl.
This means that the raw material for gasoline costs between $1.45 and $1.90 per gallon. This is before it is imported and shipped to the refineries.
Next, you have to add taxes. State and Federal. As of March 2007, the national average was $0.27 and $0.45 per gallon respectively, so the current US average cost for raw material and taxes are now between $2.17 and $2.62 per gallon.
...and we haven't even refined the oil into gasoline yet! To refine the oil, we have to heat it (energy costs), 'crack' it (break it into various components in a distillation column), and whip a little technology into it so it meets local, state, and federal emissions and production standards (additives, blend for octane, etc). There are also transportation costs for shipping from regional refineries to your local station. There is also a large, national network of oil pipelines (East and West coast and Alaska) that must be maintained. And don't forget your local gas station - they need to make a profit as well (typically under $0.10 per gallon).
NOTE: Due to the lower densities of many petroleum products, a 42-gallon barrel of crude oil can generate roughly 44 gallons of petroleum products. About 20 gallons of gasoline and 7 gallons of diesel are produced from each barrel of crude oil. Also, the generally accepted energy yield for refining operations is 10% - it takes the energy of one barrel of oil to refine ten barrels of oil.
References: http://genomicsgtl.energy.gov
If I wanted to play with the numbers, I could now state that each barrel of gasoline produces 27 gallons of fuel (20 gallons of gasoline and 7 gallons of diesel), so my net cost per gallon of fuel is between $2.26 and $2.96. With a $3.00 per gallon price at the pump, this would yield a retail profit of $0.74 to $0.04 per gallon, but this is an artificial number because oil companies squeeze everything they can out of a barrel of oil and they produce everything from fuel to tar out of each barrel.
The current, national, retail price for gasoline is currently under $3.00 per gallon, so in round numbers, the Big, Nasty Oil companies are RIPPING US OFF because we are paying between $0.83 and $0.38 per gallon over the raw material costs.
We can criticize the oil companies for making HUGE profits, but the only reason they made record profits is because gasoline consumption is at record levels. The record profits also also amounted to less than 15% growth, but that's another story you won't hear on Fox News.
I also believe that most people have not taken the time to take a critical look at the US Energy Policy (oh, wait, we don't have one!) and figure out where we need to be to reduce our dependence on fossil fuels.
posted by Paul at 5/21/2007 03:22:00 PM
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