Learn how refiners and petrochemical manufacturers make modern life possible!
The U.S. refining and petrochemical manufacturing industries are large and high-tech, supporting nearly 2 million American jobs:
The Refining Process
In the U.S., more than 140 refineries (owned by more than 50 companies) have the ability to process 17.9 million barrels of crude oil each day. Gasoline accounts for nearly half of U.S. petroleum product production. Diesel fuel for trucks, construction vehicles, farm equipment, and trains represents about 30 percent of the average production at a domestic refinery. Jet fuel is an additional 10 percent.
The refining process begins with crude oil. Crude oil is composed of thousands of different chemical compounds called hydrocarbons, all with different boiling points. For example, a typical crude oil may begin to boil at 104° F to produce petroleum gas used for heating and making plastics, and finish boiling at over 1000° F to produce residuals such as petroleum coke and asphalt.
The Costs of Gasoline
The cost of crude oil has the most effect on what consumers pay at the pump. According to the Energy Information Administration (EIA), the cost of crude oil – the basic material used to make gasoline – accounts for approximately 55-70 percent of the retail price of gasoline. Crude oil’s price is set on the global market before the refiner even touches the raw material, and the price can be affected by many factors such as OPEC production levels, changing global demand for crude oil, economic outlooks and geopolitical instability. Fortunately, dramatic increases in U.S. crude oil production on state and private lands are helping to moderate and reduce the global price of crude oil, so right now consumers are seeing lower gasoline prices at the pump.
Refiners buy crude oil, the raw material from which gasoline is manufactured. Refining the crude oil into gasoline represents about 16 percent of what consumers paid at the pump in September 2015. Within that 22 percent, refiners must pay for wages, maintenance, catalysts, fuels, electrical power, equipment, financing and other expenses.
Distribution and Marketing:
The distribution and marketing of a gallon of gasoline accounted for 20 percent of the price of a gallon of gasoline in September 2015. Once manufactured, gasoline leaves the refinery and is shipped to local terminals for distribution to service stations. The retail sale of gasoline is one of the most competitive markets in the U.S. Retailers set the price at the pump by factoring in the price they paid for the fuel, the costs of operating the service station, and the competitive price being charged by other fuel retailers. Although many convenience stores carry the flag of oil companies, over 99 percent of filling stations are franchises that are owned and operated by independent businessmen and women (NACS). The fuels distribution system is large and complex:
- 124,443 miles of crude oil and refined petroleum product pipelines (AOPL/API, “U.S. Liquids Pipeline Usage & Mileage Report”)
- 98 U.S. flagged ships which move products between U.S. ports (American Maritime Congress)
244 million tons of petroleum moved annually via tugboat, towboat, and barge (The American Waterways Operators)
407,761 carloads of crude by rail in 2013 (Association of American Railroads)
397,158 barrels of crude oil and petroleum products in storage terminals (Energy Information Administration, Dec. 2014)
Approximately 162,000 retail gasoline outlets (The Brattle Group, “Understanding Crude Oil and Product Markets”)
State and federal taxes for September 2015 contributed to 19 percent of the cost of a gallon of gasoline. While many areas also have local taxes, this number does not include these taxes. Total gas taxes range from 30 cents per gallon in places like Virginia to more than 60 cents per gallon in states like New York and California.
What Exactly is a Petrochemical?
Petrochemicals are a set of very specific chemical compounds, which can be made from oil, natural gas, coal or other sources. Oil and natural gas are used as feedstocks (the main raw material used in the manufacture of a product) to make approximately 99% of U.S. petrochemicals.
When people hear the term “petrochemical,” they often think of products made from petrochemicals such as plastics or some other complex product derived from oil. Either that or they think of petroleum-based solvents like those used in paints and coatings.
The basic petrochemicals are ethylene, propylene, butadiene, benzene, toluene, and xylene. From these come a very large number of other chemicals, which are called, “petrochemical derivatives” or simply, “derivatives.”
Many petrochemicals are produced using high temperatures (over 1500⁰ F) and pressures (over 1000 psi). This requires large amounts of energy and sophisticated engineering. Because of these high-tech processes, energy consumption accounts for a significant portion of the total cost of production. As energy costs rise, the cost of doing business also rises. Access to affordable and reliable energy sources (such as natural gas) is essential to allowing the U.S. petrochemical industry to remain competitive in an increasingly global marketplace.
Products made from Petrochemicals:
Essentially, nearly everything that makes the modern world possible is made from petrochemicals as a starting material. Airplane components, medical devices, cell phones, wind turbines, solar panels, computers, televisions, construction materials, and even aspirin, just to name a few, are all made using petrochemicals.
Where Can I Learn More?
Explore our education site to learn how refiners and petrochemical manufacturers make modern life possible: http://education.afpm.org/