Here's a California Energy Commission web page that explains why a barrel of crude makes more than 42 gallons of finished product. It's because they add things to it during the refining process! So once again, there is no free lunch, with something made from nothing.
The no new refineries arguement makes no sense around here. There are four refineries in my local area and I have worked in all four as a crane operator.
All for presently refine four times or more the daily amount they did when they came on line due to expansion. In other words there has been the equivelent of three new refineries built into each one of them. Or twelve equivelent new refineries for the four plants.
Jim
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Sorry folks, you cannot get a full barrel of gasoline from a fuel barrel of crude oil. Crude contains many products all with a different vaporization point. Benzene and gasoline are on the low end of the scale so when the refining, which is like grandpas old whiskey still, boils the crude oil the first vapors are the benzene and gasoline. The, and this is just an approximation so do not hold me to the scientific numbers, values, and exact order, is kerosine, jet fuel, diesel and home heating oil, then comes the goop to make plastic, asphalt, synthetic cloth and more. So about 20 gallons of gasoline is it.
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FYI kerosene, #1 diesel, stove oil and Jet A are basicly the same product. Jet A has the least sulphur so most refineries refine to the Jet A spec and sell that for all four products. Different tax on each and dye in some but it is all the same. Only one storage tank instead of four.
Quote: However there is a total of 45 to 49 gallons of refinery products that come out of a 42 gallon barrel of crude, including jet fuel and diesel.
I've just got to beg for a short explanation of this. It sounds too much like plugging the charger into the inverter output to create free energy.
Dividing $120 by 42 gives $2.86 for a gallon of crude. Subtracting 43 cents per gallon to account for taxes in Oregon from the current price of regular (about $3.70) yields a price of $3.27 per gallon, or 41 cents per gallon over the price of crude. I'm honestly surprised that it can be pumped from the ground, refined, shipped, and sold with that small of a margin.
Pumping crude out of the ground, separating it from coproduced water and sand, treating acidity, turning tar into something resembling a refinable crude, shipping crude to refinery, paying royalties and production taxes, etc are expenses to the "upstream" side of the business, it comes out of the $120.
Refining, shipping to end users, selling the fuel is the "downstream" side of the business, it has to come out of the 40 cents. Downstream operations for most refiners in the U.S. are returning somewhere around 20 cents a gallon.
Some companies (like Tosco) operate downstream only, others (like Occidental) operate upstream only, but most of the big oil companies are integrated. When oil prices are high, the upstream business does well, the downstream business takes a beating. When oil prices are low, the upstream business takes a beating (especially on reduction in value of assets, which does not figure as an expense), the downstream business does a little better because its major cost, buying crude, has been lowered.
What never shows up on the expense ledger (because of the way the SEC and the IRS require oil companies to do accounting) are the large upstream capital costs: buying exploration licenses, seismic surveys, exploration drilling, buying development licenses, development drilling, building production platforms, building on-site crude processing systems, and depletion of asset value. These costs typically run 40% to 60% of net revenue from the upstream side of the business, and come out of net revenue.
Which is why it is misleading for the press to cite the net revenue figures oil companies must report to the SEC and call them "profits" because most people think of "profit" as something free and clear, after expenses. These numbers are not free and clear, some really big costs yet to be paid out of these so-called "profits."
This is the case, actually, for many businesses, there is capital reinvestment that doesn't show on the expense ledger, but extractive industries like petroleum production and mining are capital intensive to the extreme, and most of the investment is to hold ground on asset value. Low capital industries like retailing, much more of net revenue is actually profit, and capital investment shows up as business expansion.
If you're making a feeble attempt to defend the outrageous profits that oil companies are making, you failed miserably. Of course the good news is they will eventually be their own worst enemy...if they don't destroy this country first.
Speculation and the very low value of the dollar are big factors in the prices we are paying. We really need a lower speed limit and possibly a tax increase to reduce demand. Everyone likes to complain, very few want to sacrifice to lower prices.
Some Senators are calling for lower ethanol production. I'm sure the oil companies welcome that.
I'm not going to judge if the oil company profits are reasonable or not, because I don't know. And I also don't think it matters because the problem is with us, not the oil companies. If we complain about the high prices but keep on consuming as much, the 'actions speak louder than words' doctrine comes into play. I think everybody agrees that oil is a finite resource and we Americans have been pigging out on it while it was cheap. Our whole way of life got centered around cheap oil and now we're paying the price. All of the other countries have gotten along just fine with more efficient vehicles, but we need our big pigs and fast acceleration. Historically gas in Germany has been at least double the price of ours. Right now, factoring in the exchange rate, it's about the same. They're affected too, but a lot less than we are. We partied harder, and now the hangover is worse.
It's the same thing with cell phones, cable TV, and credit cards. The costs start out reasonable, we make these things necessities in our lives, then the companies have a blank check to raise the rates. We just shrug our shoulders, complain, say 'well I gotta have it', and pay the price. I think the high price of gas is due more to the stupid American public and gutless politicians than the oil companies or OPEC.
Of course, I've now ruined this thread as a Tech Issue.
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