THE CRUDE OIL MARKET 209
The petroleum refining industry provides products that are critical to the functioning of the economy. Virtually all transportation,
including land, sea, and air, is fueled by products that are refined
from crude oil. Industrial, residential, and commercial activities, as
well as electricity generation, use petroleum-based products. Along
with volatile changes in crude oil prices, the industry has faced
evolving health, safety, and environmental requirements that have
changed and multiplied product specifications and required capital
investment in refineries.
In fact, the demand for refined products — transportation fuels
in particular — has been rising steadily over the past two decades.
From 2000 to 2002, consumption of refined petroleum products in
the United States peaked at an all-time high of 19.7 million barrels
per day.
As the demand for petroleum products has grown, the quality
and the performance of petroleum products have changed substantially as a result of environmental regulations and motor vehicle
performance requirements. Over the next several years, the industry will be upgrading its facilities for the following purposes:
1. To produce ultra-low-sulfur gasoline and diesel fuel
2. To blend in ethanol and other biofuels (Chapter 9) into
gasoline and diesel
3. To reduce the environmental impacts of plant
operations.
The 1990s were widely viewed by the industry as a period of
unprecedented economic volatility and hardship, characterized by
poor profit margins as a result of substantial excess capacity, the
increasing cost of compliance with environmental regulations, and
unfavorable crude oil price trends. At the same time, consolidation
and corporate restructuring have dramatically changed the refining
industry in the United States. In addition, most vertically integrated
major oil companies have scaled back, shut down, or spun off their
process technology development divisions. Many also have shed
refineries and retail outlets leading to the emergence of new business models and large independent refining companies.
Since the late 1990s, the industry has undergone significant
structural change which might alter its profitability requirements, its
ability to provide stable product volumes to the consuming market,
as well as its ability to adapt to current and future environmental
requirements.
The petroleum refining industry provides products that are critical to the functioning of the economy. Virtually all transportation,
including land, sea, and air, is fueled by products that are refined
from crude oil. Industrial, residential, and commercial activities, as
well as electricity generation, use petroleum-based products. Along
with volatile changes in crude oil prices, the industry has faced
evolving health, safety, and environmental requirements that have
changed and multiplied product specifications and required capital
investment in refineries.
In fact, the demand for refined products — transportation fuels
in particular — has been rising steadily over the past two decades.
From 2000 to 2002, consumption of refined petroleum products in
the United States peaked at an all-time high of 19.7 million barrels
per day.
As the demand for petroleum products has grown, the quality
and the performance of petroleum products have changed substantially as a result of environmental regulations and motor vehicle
performance requirements. Over the next several years, the industry will be upgrading its facilities for the following purposes:
1. To produce ultra-low-sulfur gasoline and diesel fuel
2. To blend in ethanol and other biofuels (Chapter 9) into
gasoline and diesel
3. To reduce the environmental impacts of plant
operations.
The 1990s were widely viewed by the industry as a period of
unprecedented economic volatility and hardship, characterized by
poor profit margins as a result of substantial excess capacity, the
increasing cost of compliance with environmental regulations, and
unfavorable crude oil price trends. At the same time, consolidation
and corporate restructuring have dramatically changed the refining
industry in the United States. In addition, most vertically integrated
major oil companies have scaled back, shut down, or spun off their
process technology development divisions. Many also have shed
refineries and retail outlets leading to the emergence of new business models and large independent refining companies.
Since the late 1990s, the industry has undergone significant
structural change which might alter its profitability requirements, its
ability to provide stable product volumes to the consuming market,
as well as its ability to adapt to current and future environmental
requirements.