OT: Oil Refineries - this is very off topic

JohnR · 2005-02-08T13:32:51+00:00

OK this is a question about oil refineries, absolutely sod all to do withcars or their maintenance but it stems from one of those conversations you(might) have with a mate arguing the toss that lasts far, far too long, goesround in circles and leaves you coming away thinking what the fuck was allthat about! It started by discussing the 1 million an hour profits Shell aremaking and whether it's right. I think if they're successful good on 'em.I'm asking a simple but not necessarily straightforward question. I've hadthis conversation with a mate about oil and it's historical use and how itrelates to modern times. Basically this guy reckons, and he's adamant, thatpetrol at refineries is essentially a highly saleable waste byproduct ofprocesses extracting other components from the oil. I can't believe that fora second - but I can't factually refute it either. I always assumedrefineries exist primarily to refine crude into lighter oils and that thesale of the components removed in that process help offset or cover thecosts of getting the various grades of fuel oil out. His argument is thatpetrol is just what's left once this has been done and that it effectivelycosts the oil company absolutely nothing to produce (given that it isn't*primarily* what they're after according to him). I find that a totallybizarre point of view but as I said can't actually refute it. Does anyonehave any information to clearly demonstrate this is not the case, opinionjust absolutely won't do with this bloke. He's an ex-miner, says what helikes and likes what he bloody well says and relates refineries to cokingplants. According to him coke is the waste product of the process toextracting minerals and other components from coal and was sold cheaply asfuel. British Coal then demanded coking plants increase the cost of coke perton well above that of coal or lose the supply (according to him) and sothey started making an absolute fortune on what was initially a wasteproduct sold off for peanuts....

G

Grimly Curmudgeon 21 years ago

It was somewhere around Barstow, on the edge of the desert, when the drugs began to take hold. I remember bweebar saying something like:

"Oil Creek in western Pennsylvania abounds in oil seeps that ooze thick black crude into the stream. These seeps were well known to the Seneca Indians, one of the Iroquois Nation tribes, who used the oil as a salve, mosquito repellent, purge and tonic. Many settlers also believed that these oils were medicinal, and "hawkers" sold bottles of it, as early as

1792, as a cure-all called "Seneca Oil" "

Ah, the origins of 'Snake Oil'.

Vote

M

Mark Hewitt 21 years ago

I believe that orginally petrol was 'flared off' as it wasn't needed, of course that doesn't happen now, it's far too valuable.

Vote

S

Steve Walker 21 years ago

That's right. Petrol was originally a waste product of the early refining processes. At first it was flared or even just poured away (frightening!). Someone then had the bright idea of burning the petrol to provide heat and power for the refining processes. Later as petrol began to be needed for engines and was no longer simply a waste product, the processes were altered. Basically (grossly oversimplifying), by playing about with process conditions and by cracking the oil to produce more of the lighter fractions more petrol can be produced at the expense of the heavier fractions - so it's not that petrol is a "free" waste product, it can only be produced in increased quantities by sacrificing production of some of the heavier products.

Steve Walker

Vote

G

Guy King 21 years ago

The message from Steve Walker contains these words:

It was also popular as a cleaning fluid.

Vote

S

Steve Walker 21 years ago

Yes, cleans your whole house right away! ;)

Vote

H

Huw 21 years ago

No he is not right. His argument is like saying calves are the primary product of milking cows and that the milk is a by-product and therefore is effectively produced free. This is patently not the case because there is a cost, the highest cost, involved in its production. Similarly, oil refineries would not exist with the size and output that they have, with the need for so much crude if there was not the huge demand for fuel of all sorts. Each fraction has its cost of production, which may be incidental or not, and each sold contributes to pay for those costs as much as possible, given market demand, and any revenue left after selling all fractions and paying all costs is the profit. There are all kinds of manipulation of costs and profit divisions between exploration, drilling, refining, distribution and retailing which are pure business and have nothing much to do with the fundamentals of refining economics. All this is basic business and to allocate costs to minor fractions is missing the point, especially if the sale of those fractions does not pay for the refining process. The existence of a refinery is to meet demand and if the primary demand is for bulk fuel then the costs are born by that demand.

Huw

Vote

H

Huw 21 years ago

formatting link

An oil refinery exists primarily to meet market demand, nothing more, nothing less. It can produce varying but finite proportions of products and if demand is low for a particular fraction then price will lower to meet that demand and effectively create an improved market for it or production is lowered for the fraction as much as possible. If a particular fraction is in high demand with a limited supply then price will rise until the demand lowers or more is produced to balance the demand. This is called a market economy and it works for oil the same as for anything else and is prone to the same forces and manipulation as any other sector of the economy.

Huw

Vote