Market Prices For The Products Produced
Oil refineries produce value-added petroleum products from crude oil. Profitability is thus determined by a number of completely different variables:
– Feedstock costs (primarily crude oil)
– Fuel costs and other operational costs for the refinery itself
– Prices of complying with emissions rules (significantly NOx)
– Market prices for the merchandise produced.
Figuring out profitability for a specific refinery could be very difficult since knowledge on operational and environmental compliance costs are generally not obtainable. A tough measure might be obtained by calculating the cost of crude-oil feedstock (though to do that with precision would require knowledge of the crude blends used in a selected refinery) and evaluating that price with the market worth of the suite of merchandise produced at the refinery. This nonetheless requires more info than is perhaps publicly obtainable for a typical refinery, and is topic to market situations for the various products produced.
A helpful but simplified measure of refinery profitability is the “crack spread.” The crack spread is the distinction within the sales price of the refined product (gasoline and fuel oil distillates) and the price of crude oil. A mean refinery would comply with what is named the 3-2-1 crack unfold, which means for each three barrels of oil the refinery produces an equivalent two barrels of gasoline and one barrel of distillate fuels (diesel and heating oil). This ratio of refined product output intently mirrors the composition in Determine 2.Four, however remember that the crack spread is barely a primary-order approximation of how worthwhile a refinery could be on the margin! The higher the crack unfold the more money the refinery will make, so it is going to be using as a lot capability it has out there. Inversely, at some lower crack spread prices, it really may be within the refinery’s greatest interest, as a result of costs for the plant, to scale again the quantity of capacity utilized.
Calculating the 3-2-1 crack unfold typically makes use of revealed prices for crude oil, gasoline and distillates. These prices are sometimes taken from the new York Mercantile Trade. The NYMEX has traded contracts for crude oil and gasoline however no contract for diesel gasoline (essentially the most-produced of the distillate gasoline oils). In calculating the three-2-1 crack spread, costs for heating oil futures are typically used instead. Under is an example of methods to calculate global petroleum refining industry report 49 the crack spread, using data from 2012.
– Oil Worth: $84.Fifty four/barrel
– Gasoline Price: $2.57/gallon
– Heating Oil Worth: $2.79/gallon
– (remember that forty two gallons = 1 barrel)
– (2 barrels * forty two gallons/barrel * $2.57/gal of gasoline) +
(1 barrel * 42 gallons/barrel * $2.79/gal of heating oil) –
(three barrels * $84.Fifty four/barrel of oil) =
$79.44 revenue / 3 barrels of oil.
– The crack unfold would thus be $seventy nine.Forty four / three = $26.Forty eight/barrel of oil
The crack unfold, of course, just isn’t an ideal measure of refinery profitability. What it really measures is whether the refinery will earn a living at the margin – i.e. whether or not a further barrel of crude oil bought upstream will yield enough revenues from saleable products downstream. In actuality, present refineries must consider their refining prices in addition to only the cost of Fixed tube plate heat exchanger crude oil. These costs include labor (although that is usually a small a part of refinery operations); chemical catalysts; utilities; and any short-time period financial costs akin to borrowing cash to take care of refinery operations. These variable prices of refining might quantity to perhaps $20 per barrel (relying on circumstances in utility pricing and monetary markets). In the example above, the true margin on refining can be $6.58 per barrel of crude oil – a lot decrease than the straightforward crack spread would recommend.
The crack spread tends to be delicate to the slate of merchandise produced from the refinery. In the instance above, we used gasoline and distillate fuel oil (heating oil) as a result of these are two usually high-valued products, and U.S. refineries are typically engineered to maximise production of gasoline and gas oil.
The crack spread is also delicate to the collection of the oil worth used. In the example above, we used the NYMEX futures worth for crude oil, which recall is based on the West Texas Intermediate blend – a fairly gentle crude oil. Many U.S. refineries, nonetheless, are engineered to just accept heavier crude oils as feedstocks. If there are systematic differences in the prices of heavy crude oils versus West Texas Intermediate, then the crack spread calculation (while illustrative) will not be sensible for a selected refinery.
The Energy Data Administration just lately published a pair of fine articles describing how the U.S. refinery fleet has been adjusting to modifications in U.S. crude oil production. Not global petroleum refining industry report 49 solely has the amount of crude oil produced within the U.S.