Thursday, November 04, 2004

Been hearing gripes about fuel costs

Now that our national migrane is over for another four years, we can talk about other things.
Lets get some of the real costs of fuel, as I understand them. There's a lot that goes into energy production- this is an extremely simplified version- "Kurts notes on cliff's notes" if you will.

Here are my two main sources- they're both readable.
Oil industry Stats
Crude Oil Info sheet

First PRODUCTION- what percent is produced and imported from where: Gibson Consulting gives us these facts:
Country Production
Rank & Production1999-- Early 2002 Rank and Production
1. Saudi Arabia 7.7 million barrels/day-- 3. 7.7 mb/d
2. Former Soviet Union 7.1 million barrels/day-- 1. 8.6 mb/d
3. USA 5.9 million barrels/day-- 2. 8.1 mb/d
4. Iran 3.6 million barrels/day-- 4. 3.7 mb/d
5. China 3.2 million barrels/day-- 7. 3.3 mb/d
6. Norway 3.0 million barrels/day-- 6. 3.4 mb/d
7. Mexico 3.0 million barrels/day-- 5. 3.6 mb/d
8. Venezuela 2.8 million barrels/day-- 8. 2.8 mb/d
9. United Kingdom 2.7 million barrels/day-- 10. 2.6 mb/d
10. Iraq 2.5 million barrels/day-- 11. 2.4 mb/d (Boy, they sure need NUKES for cheap energy -ed)

A barrel of crude is 42 gallons (American gal) This is what you get out of it:

Petroleum Products Yielded from
One Barrel of Crude in 2000
Finished Motor Gasoline -19.69
Distillate Fuel Oil- 9.70
Kero-Type Jet Fuel -3.99
Residual Fuel Oil- 1.76
Still Gas -1.89
Petroleum Coke -2.14
Liquefied Refinery Gas -1.76
Asphalt and Road Oil -1.34
Naptha for Feedstocks- 0.63
Other Oils for Feedstocks- 0.50
Lubricants -0.46
Special Naphthas- 0.13
Kerosene -0.17
Miscellaneous Products- 0.17
Finished Aviation Gasoline- 0.04
Waxes- 0.04

Total -44.41 (You'll notice that they "gained" 2.41 gal of product) A barrel of 42-U.S. gallons of crude oil yields slightly more than 44 gallons of petroleum products. This "process gain" of volume is due to a reduction in the density during the refining process. Think of popcorn.

Now we come to The cost part-which is always changing.
Some of the factors involved are:
-The price of Crude is up- as high as $55 per barrel (light, sweet crude -ed)
Refinery capacity in the US is near its maximum. (more on this later -ed)One refinery in California is to close later in 2004. Oil tanker capacity for trans-oceanic shipping is also 100% reserved for the forseeable future, and shipping costs have nearly tripled.
The US deficit, around $500 billion in 2004, causes the value of the dollar to decline. Because oil is priced in dollars, no matter where in the world it comes from, producers want higher prices in order to maintain their income.
Local requirements for special gasoline blends to meet environmental regulations result in smaller batches, which are more expensive for refineries to produce. Applies especially to California.
Costs reflect distance from refineries (transportation cost). In the US, 50% of gasoline is refined in the Gulf Coast.
Taxes. Federal excise tax on gasoline is about 19¢ per gallon; state tax averages about 23¢ per gallon; in California there is an additional 7.5% sales tax.
Any time there is a problem with a pipeline or refinery, it can impact the supply of gasoline at least in local markets, and the price can spike.
Credit card fees paid by retailers amount to about 3.5%, or 7 cents a gallon at $2.00 per gallon.

Now that we have some basics, here's a cost breakdown:
Expense Amount
Production cost 60¢
Producer profit 8¢
Refining cost 13¢
Marketing cost 5¢
Transportation cost 15¢
Retailer cost 6¢
Refiner, marketer,
transp. & retailer profit 10¢ ( that's one DIME split between 4 people - remember the 7cent credit card fee?) -ed)
US Taxes 19¢
Average state taxes 23¢
TOTAL $1.59

More on refineries later- I'm taking up too much space now.

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