178 PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
The terms upstream prices and downstream prices are used to
distinguish the relative position of two prices in the distribution
system. Upstream prices are commodity prices closer to the production point relative to downstream prices, which are motor gasoline
prices closer to the final consumption point. For example, retail gasoline prices are downstream relative to all other commodity prices
because they constitute the price the charged to the consumer. Also,
pipeline spot gasoline prices are downstream from United States
Gulf Coast spot gasoline prices because they are closer to the consumer. Conversely, United States Gulf Coast USG spot prices are
upstream relative to pipeline spot prices because the United States
Gulf Coast spot prices are further removed from the final consumption of gasoline and are closer to the production side. Crude oil spot
prices are upstream of all motor gasoline prices because they are
farthest from the final consumer.
6.6 Effect of Refining Capacity
The demand for refined products, particularly transportation fuels,
has been rising steadily over the past three. As demand for petroleum products has grown, their quality and performance have
changed substantially as a result of environmental regulations and
motor vehicle performance requirements. The refining industry is
already upgrading facilities to produce ultra-low-sulfur gasoline
and diesel fuel and to reduce the environmental impacts of plant
operations.
The 1990s were widely viewed by the industry as a period of
economic volatility that was characterized by poor profit margins
as a result of the increasing cost of compliance with environmental
regulations and unfavorable crude oil price trends. At the same
time, the corporate restructuring and consolidation has dramatically changed the refining industry in the United States (Peterson
and Mahnovski, 2003). In addition, the crude oil slate into refineries was changing to include low API gravity/high sulfur crude oil
(Swain, 1991,1993,1997, 2000) and operations were highly dependent upon the ability of current refinery operations to accept crude
oil for production of the different products (Speight, 2007).
Different types of crude oil yield a different mix of products
depending on the qualities of crude oil. Crude oil types are typically
The terms upstream prices and downstream prices are used to
distinguish the relative position of two prices in the distribution
system. Upstream prices are commodity prices closer to the production point relative to downstream prices, which are motor gasoline
prices closer to the final consumption point. For example, retail gasoline prices are downstream relative to all other commodity prices
because they constitute the price the charged to the consumer. Also,
pipeline spot gasoline prices are downstream from United States
Gulf Coast spot gasoline prices because they are closer to the consumer. Conversely, United States Gulf Coast USG spot prices are
upstream relative to pipeline spot prices because the United States
Gulf Coast spot prices are further removed from the final consumption of gasoline and are closer to the production side. Crude oil spot
prices are upstream of all motor gasoline prices because they are
farthest from the final consumer.
6.6 Effect of Refining Capacity
The demand for refined products, particularly transportation fuels,
has been rising steadily over the past three. As demand for petroleum products has grown, their quality and performance have
changed substantially as a result of environmental regulations and
motor vehicle performance requirements. The refining industry is
already upgrading facilities to produce ultra-low-sulfur gasoline
and diesel fuel and to reduce the environmental impacts of plant
operations.
The 1990s were widely viewed by the industry as a period of
economic volatility that was characterized by poor profit margins
as a result of the increasing cost of compliance with environmental
regulations and unfavorable crude oil price trends. At the same
time, the corporate restructuring and consolidation has dramatically changed the refining industry in the United States (Peterson
and Mahnovski, 2003). In addition, the crude oil slate into refineries was changing to include low API gravity/high sulfur crude oil
(Swain, 1991,1993,1997, 2000) and operations were highly dependent upon the ability of current refinery operations to accept crude
oil for production of the different products (Speight, 2007).
Different types of crude oil yield a different mix of products
depending on the qualities of crude oil. Crude oil types are typically