186 PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
the blended product that is sold as gasoline. The finished gasoline
products may contain more than 200 individual hydrocarbons and
additives so that the product meets the designated specifications.
The quality of the crude oil dictates the level of processing and reprocessing necessary to achieve the optimal mix of product output.
Hence, price and price differentials between crude oils also reflect
the relative ease of refining. A premium crude oil, such as West
Texas Intermediate (WTI), the U.S. benchmark crude oil (Chapter 4),
has a relatively high natural yield of desirable naphtha and
straight-run gasoline, nother premium crude oil, Nigeria's Bonny
Light crude oil, has a high natural yield of middle distillates. By
contrast, almost half of the simple distillation yield from Arabian
Light crude oil, the historical benchmark crude, is a heavy residue,
or "residuum," that must be reprocessed or sold at a discount to
crude oil. Even West Texas Intermediate and Nigeria's Bonny Light
crude oil have a yield of about one-third residuum after the simple
distillation process.
In recent years, growth in the demand for petroleum products has
led to an improvement in capacity utilization, increasing operating
efficiency and reducing costs per unit of output. Refinery capacity
is based on the designed size of the crude distillation unit(s) of a
refinery — often referred to as nameplate capacity). Occasionally,
through upgrades or de-bottlenecking procedures, refineries can
process more crude than the nameplate size of the distillation unit
would indicate. In such cases, a refinery is able to achieve a utilization rate greater than 100% for short periods of time.
Finally, not all investment decisions are driven by refinery economics; refiners also make investment decisions because of voluntary actions or legislative and regulatory requirements. In recent
years, governments and industry have directed considerable effort
towards reducing the environmental impact of burning fossil fuels.
Many of the initiatives have been aimed at providing cleaner fuels.
Petroleum refining is a very complicated and capital-intensive
industry. New environmental regulations require the industry to
make additional investments to meet the more stringent standards.
The ultimate operating variable in the economics of refining is
the price of crude oil. Heavy high-sulfur crude oil can cost up to
one-third less than lighter, low-sulfur crude oil but because highsulfur crude oil requires more processing, refineries that buy these
cheap crude oils usually higher fixed expenses for equipment and
labor. In fact, processing high-sulfur crude oil requires greater
the blended product that is sold as gasoline. The finished gasoline
products may contain more than 200 individual hydrocarbons and
additives so that the product meets the designated specifications.
The quality of the crude oil dictates the level of processing and reprocessing necessary to achieve the optimal mix of product output.
Hence, price and price differentials between crude oils also reflect
the relative ease of refining. A premium crude oil, such as West
Texas Intermediate (WTI), the U.S. benchmark crude oil (Chapter 4),
has a relatively high natural yield of desirable naphtha and
straight-run gasoline, nother premium crude oil, Nigeria's Bonny
Light crude oil, has a high natural yield of middle distillates. By
contrast, almost half of the simple distillation yield from Arabian
Light crude oil, the historical benchmark crude, is a heavy residue,
or "residuum," that must be reprocessed or sold at a discount to
crude oil. Even West Texas Intermediate and Nigeria's Bonny Light
crude oil have a yield of about one-third residuum after the simple
distillation process.
In recent years, growth in the demand for petroleum products has
led to an improvement in capacity utilization, increasing operating
efficiency and reducing costs per unit of output. Refinery capacity
is based on the designed size of the crude distillation unit(s) of a
refinery — often referred to as nameplate capacity). Occasionally,
through upgrades or de-bottlenecking procedures, refineries can
process more crude than the nameplate size of the distillation unit
would indicate. In such cases, a refinery is able to achieve a utilization rate greater than 100% for short periods of time.
Finally, not all investment decisions are driven by refinery economics; refiners also make investment decisions because of voluntary actions or legislative and regulatory requirements. In recent
years, governments and industry have directed considerable effort
towards reducing the environmental impact of burning fossil fuels.
Many of the initiatives have been aimed at providing cleaner fuels.
Petroleum refining is a very complicated and capital-intensive
industry. New environmental regulations require the industry to
make additional investments to meet the more stringent standards.
The ultimate operating variable in the economics of refining is
the price of crude oil. Heavy high-sulfur crude oil can cost up to
one-third less than lighter, low-sulfur crude oil but because highsulfur crude oil requires more processing, refineries that buy these
cheap crude oils usually higher fixed expenses for equipment and
labor. In fact, processing high-sulfur crude oil requires greater