With the high cost of filling your gas tank today, you might be interested in understanding the process and the real costs associated with getting the gasoline at your local station from the crude oil at the refineries. Oil companies are making record profits and it is easy to cast them as villains out to gouge the consumer, however, while oil companies are generating record total profits, their profit margin is actually falling. The following is a brief overview of how the refining process works and how profits margins are calculated.

Four Major End Uses

Cost To Refine Oil

According to the U.S. Department of Energy (D.O.E), the refining of crude oil produces such widely used end-item products as reformulated (sulfur-free) and conventional gasoline, kerosene-based jet fuels, lubricants such as motor oil, as well as home-heating fuel, kerosene, asphalt and road oil. Most of these products are used primarily in four different ways. They can be burned, as is the case for gasoline, jet fuel, and diesel fuel to provide the energy for driving automobiles, trucks, airplanes, ships, etc.; to heat a building; to supply the energy for driving electric-generating turbines; and to create petrochemicals and products such as plastics, polyurethane, and a myriad of other petroleum-based goods for the consumer.

Beginning The Refining Process

First - a word about the refining process. Simply stated, because crude oil is made up of a mixture of hydrocarbons, the first step in the refining process is to separate the different types of hydrocarbons from the mix. This is accomplished by heating the crude oil in a process similar to that used in a “moonshine-still”. During the course of the distillation process different products are boiled off and extracted at different temperatures. For instance, at the lowest temperatures, less than 360 degrees F., the lighter products are recovered such as butane, naphtha, and low octane gasoline. The yield at this stage is about 20 percent gasoline and about 50 percent residual crude. As the temperature rises to 650 degrees F., distillates such as jet fuel, kerosene, home heating oil and diesel fuel are recovered next.

End Of The Process

Finally, at the more sophisticated refineries, the residual oil that is left, the heaviest and least valued of the crude is processed even further at temperatures over 1000 degrees F. to extract even more of the lighter products, principally gasoline. By using these extra steps in the process, gasoline yields of around 60 percent can be obtained with only about 5 percent residual. Additional processing of the gasoline from that point can, among other things, remove the sulfur content and for some of the gasoline, produce a higher octane, which because of this extra processing will cost you more at the pump.


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