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  Energy Information Administration (EIA), Short-Term Energy Outlook

Petroleum Consumers

The largest consumer / importer of crude oil is the United States, followed by China due to the size of their respective economies and transportation infrastructure.

The largest petroleum consumer nations in the world (2006)

1. United States

2. China

3. Japan

4. Russia

5. Germany

6. India

7. Canada

8. Brazil

9. South Korea

10. Saudi Arabia

11. Mexico

12. France

13. United Kingdom

14. Italy

15. Iran

Source: EIA International Energy Annual (2000-2004), International Petroleum Monthly (2005-2006).

The largest petroleum suppliers to the United States (2007 - in millions of barrels per day)

1. Canada (1.864)

2. Saudi Arabia (1.453)

3. Mexico (1.410)

4. Venezuela (1.150)

5. Nigeria (1.082)

6. Angola (.496)

7. Iraq (.485)

8. Algeria (.443)

9. Ecuador (.198)

10. Kuwait (.176)

Source: U.S. Energy Department

During 2008, when petroleum prices (per barrel) and refined gasoline prices (per gallon) reached record highs, there was direct correlation in the decline of automobile miles driven by U.S. citizens. This observable reltaionship indicates that when prices increase over a certain level, economic behavior is modified. For instance, U.S. citizens also drastically reduced their purchase of large, low-mileage SUV vehicles from mid-2008 and onwards, even after the price for gasoline had declined dramatically by November 2008. In addition, when the price increased there was also bi-partisan support to increase U.S. production from offshore sources in the Gulf of Mexico and both onshore and offshore sources in Alaska. Thus, when the price increased there was a clear attempt to reduce usage, increase efficiency, develop substitutes and alternatives, and increase supply.

Pricing

Prices are affected by the:

Discovery of new sources of oil

Global demand

Available transport shipping capacity

Political and economic events within producer nations that affects production and production output levels maintained by OPEC members

Threat of terrorism ("fear premium")

At the local level prices are effected by refiner capacity and scheduling (for instance, gasoline refining is maximized during the Spring while fuel heating oil commences from July / Summer)

The actual right to access and extraction is under the control of national oil companies not large, publicly-owned multi-national companies. The approximately 13 national oil companies control approximately 77% of known crude oil reserves.

OPEC (Organization of Petroleum Exporting Countries - Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, UAE and Venezuela), which accounts for approximately 33% to 40% of world petroleum production, atempts to enforce agreed-to pumping quotas of its members, however there is always an incentive to pump more, especially when the price approaches an historic high to earn record profits or when the price approaches near an historic low to maintain cash flow. The energy markets also attract quite a bit of speculative financial transactions by parties that are not attempting to hedge production or delivery obligations.

Demand for petroleum-related distillates and natural gas is highly seasonal and is also affected by local weather conditions. During the winter months in the northern hemisphere heating oil demand increases in response to the season and local weather conditions can create sharp rises in demand and cause problems for the delivery of supplies. Conversely, refiners turn to producing automotive gasoline for the summer months.

A report by the National Petroleum Council (Facing the Hard Truths About Energy: A comprehensive view to 2030 of global oil and natural gas; National Petroleum Council, July 18, 2007) suggests that the oil consumption will exceed oil production capacity, perhaps as soon as 2012. This possible condition is referred to as "Peak Oil", meaning that production capacity has reached its highest point (or perhaps a longer-term, constant production level plateau) and then enters an irreversible decline. The report indicates that the world is not running out of energy resources, however it is being challenged to locate and maintain reliable and affordable energy sources. This situation is occurring because demand will increase as several developing nations annually have a larger proportion of wealth accumulate among their respective population, which accelerates energy consumption (for instance, the growth in vehicle sales and a corresponding demand for fuel in China). However, there is a debate about Peak Oil because there is a controversy regarding the accuracy and reliability of production forecasts and estimates of recoverable oil resources.

The 2 primary sources of energy today are oil and natural gas (approximately 60% of world energy consumption combined). The real problem is that the world may be approaching the limit with regard to the number of barrels of crude oil that can be pumped, or the volume of natural gas that can be extracted, on a daily basis in relation to daily demand. Increasing extraction / production, to meet increasing demand, will become more physically, logistically difficult, hence more expensive on a per barrel / per cubic foot basis. Added to the logistical challenge are the problems related to the geopolitical relations between nations, necessary capital investment / open markets ("Conventional oil and natural gas resources are increasingly concentrated in a handful of non-OECD countries. The national oil companies and energy ministries in these countries play central roles in policy decisions about how to develop and produce their resources"), reliable transport and delivery systems, security, environmental and social issues. Solving the problem is a long-term investment: "Building new, multi-billion-dollar oil platforms in water thousands of feet deep, laying pipelines in difficult terrain and across country borders, expanding refineries, constructing vessels and terminals to ship and store liquefied natural gas, building railroads to transport coal and biomass, and stringing new high-voltage transmission lines from remote wind farms—all will require large investments over decades.

Credit Issue: What will happen to businesses (and nations) if in perhaps five to ten years there are energy shortages resulting in vastly higher prices than are being experienced today and competition is so fierce that relationships between businesses and nations is almost at the point of open hostility, perhaps barely contained by diplomacy? Are the next five to ten years sufficient enough time to develop wide spread alternative energy sources and effective conservation / reclamation procedures?

Petroleum Producing Nations

Producer nations include Algeria, Angola, Azerbijan, Brazil, Canada, Chad, China, Indonesia, Iran, Iraq, Kazakhstan, Kuwait, Libya, Mexico, Nigeria, Norway, Qatar, Russia, Saudi Arabia, United Arab Emirates, United Kingdom, United States, Venezuela.

The largest petroleum producer nations in the world (2006 Production in thousand barrels per day):

1. Saudi Arabia (10,665)

2. Russia (9,677)

3. United States (8,331)

4. Iran (4,148)

5. China (3,858)

6. Mexico (3,707)

7. Canada (3,288)

8. United Arab Emirates (2,945)

9. Venezuela (2,803)

10. Norway (2,786)

11. Kuwait (2,675)

12. Nigeria (2,443)

13. Brazil (2,166)

14. Algeria (2,122)

15. Iraq (2,008)

Source: EIA International Energy Annual (2000-2004), International Petroleum Monthly (2005-2006).

Brazil

Most active exploration and extraction is concentrated off the coast of Brazil (east of Rio de Janeiro) in an area known as the Campos Basin. The oil deposits are located at a depth of approximately 3,000 to 6,000 feet below the seabed. Recently, Brazil reported the detection of a substantial oil deposit beneath the Santos Basin (just south of the Campos Basin). The new area is referred to as the Tupi Field and as a potential reserve of approximately 5 to 8 billion barrels. In April 2008, the National Petroleum Agency (ANP) announced the detection of a new field that may be substantially larger than the Tupi field, which is referred to as the Carioca-Sugar Loaf field. Additional oil drilling areas include the Espirito Santo Basin (just north of the Campos Basin) and the Reconcavo Basin located on land just northwest of the Espirito Santo Basin. Additional recent discoveries (December 2007) includes the the discovery of new natural gas reservoirs north of the Camarupim field in the Espirito Santo Basin (exploratory drilling of wells 4-ESS-177 and 6-ESS-168, Petrobras / El Paso).

Canada

The United States has long relied upon, and been the major customer for, crude and refined petroleum products produced in Canada. However, several high profile development projects between Canadian and Chinese companies indicates that the U.S. will have to compete with China, and also probably India, for Canadian (and other) petroleum supplies. For instance, there is presently a plan to construct a pipeline from Alberta to the Canadian Pacific coast in order to export crude oil to Asia.

China

China is an oil producer but is also a net importer of petroleum and refined products. The largest oil compnay in the nation is PetroChina, which is owned by the China National Petroleum Corp. (CNPC). Oil production within mainland China is declining at a time when the economy continues to grow a rapid pace and has increased requirements for petroleum and refined products. The company has been expanding overseas in order to locate and increase reserves. PetroChina is also required by government mandate to subsidize the price of domestic fuel prices while it has to pay market prices for imports. China also has extensive reserves of natural gas in the western region of the nation and PetroChina operates a pipeline from Xinjiang Province to Shanghai and is constructing a second line to to provide gas to Sichuan Province.

Iraq

The major fields located in the Mesopotamian Foredeep Basin include the Kirkuk Field (location of the Kirkuk-Ceyhan Oil Pipeline), Majnoon Field, Rumaila Field and the West Qurna Field. The major fields in the Basra region are the Majnoun field, the Gharb al-Qurna field, and Nahr bin Omar field. The United States constructed a military installation in southeastern Iraq in order to protect the Khwar al Amaya Oil Terminal (KAAOT) and the Al Basra Oil Terminal (ABOT) in order to allow for Iraqi crude to be loaded onto tankers for tramshipment. The installations are manned by U.S., U.K. and Australian naval forces as well as the Iraqi military and are expected to remain under coalition control even after any withdrawal of troops from Iraq. The continuing problem in Iraq is that the oil sector is subject to widescale smuggling and outright robbery, and many Iraqi engineers and oil experts have already left the country in fear for their lives and families. Until some type of security is established it will be very difficult to improve productivity at fields, maintain pipeline transmission and invest in new exploration and drilling. Finally, one other possible problem is that some of the southern fields extend across the border with Iran, who is also pumping oil in the region and it reduces the amount of recoverable oil for the Iraqis.

Kazakhstan

The Kashagan field, situated in the northern part of the Caspian Sea, was discovered in 2000 and has potential reserves of approximately 12 to 13 billion barrels. The exploration and extraction is being handled by an international consortium led by Eni Spa of Italy. The project has been hindered by cost overruns (approximately $130 billion compared to the initial forecast of $56 billion). In response, the Kazaakhstan governement demanded an increased ownership share in the project, which required the other members of the consortium to transfer a portion of their ownership interest to the government. These companies include ExxonMobil Corp. (who reportedly did not agree willingly to the transfer), RoyalDutch Shell Plc., Total SA, ConocoPhillips and Inpex Holdings. Production, originally scheduled to commence in 2005, then 2008, is now expected to commence in 2010.

Netherlands

The Dutch sector of the North Sea has a number of active drilling platforms. In addition, Schoonebeek oilfield in the northeastern Netherlands is the largest onshore oilfield in Western Europe.

Norway

On October 1, 2007, Hydro (Norsk Hydro) and Statoil merged into StatoilHydro, which created the largest offshore energy explorer / operator in the world (the merger did not include Hydro's aluminum and power businesses; the Government of Norway owns approximately 2/3 of the new StatoilHydro). The reason for merging the 2 companies was so that they could seek new growth opportunities outside of Norway as a single entity, rather than as 2 separate companies, due to the fierce competition in the international markets. Overall, oil extraction in Norway has been declining, falling to approximately 2.6 million barrels (bbl.) per day from 3.5 million bbl. per day in 2000. The nation / company operates a large offshore gas filed at Orman Lange (approximately 75 miles west off the coast of Nyhamma).

Russia

Russia is the second largest oil producer (millions of barrels per day) in the world. In Russia, the largest private oil company is Yukos (includes Yuganskneftgas) while the state-owned oil producer is Rosneft. Gazprom is the state-controlled natural gas producer and the oil pipelines are owned and operated by Transneft (Gazprom is scheduled to merge with Rosneft during 2005). During 2004, Yukos experienced serious problems with the Russian government concerning negotiations over corporate taxes and had related problems with its creditors.

Saudi Arabia

The nation of Saudi Arabia is the largest source of petroleum, accounting for approximately 23% to 25% of the world's known reserves (depending on who you ask). Saudi Arabia's three largest petorleum producing fields are: Ghawar, Safaniya and Shaybah. Older large fields are located at Abqaiq and Berri. The largest oil loading port in the world is located at Ras Tanura, while a second port located at Al Juaymah (both in the The Gulf). The largest port on the Red Sea is located at Yanbu. Offshore loading is located at the Az Zuluf complex in the Gulf. The national oil company is known as Aramco. Some of Saudi Arabia's fields are in excess of 50 years of age and there is some concern that an increased amount of water is being pumped with the crude (known as "water cut" or the proportion of water to crude), which is an indication of the advanced depletion of the reserve.

United States

In the United States, mature wells in the lower 48 states are producing less as U.S. production peaked in the 1970s. Historically, oil was first extracted from the Pennsylvania and Ohio region and then moved to Permian Basin region, which is located in the West Texas and southeastern New Mexico area (which is still an active production area). Exploration for new oil reserves is concentrated in Alaska and the Gulf of Mexico. The percentage of oil production (millions of barrels per day) from the continental United States is projected to continue to decline while the percentage of production from offshore wells in the Gulf of Mexico is projected to continue to increase, however these wells will be located in ever deeper water (approximately 150 to 200 miles off the coast in water over 4,000 feet in depth with wells drilled as deep as 15,000 to 25,000 feet; the recently explored Tahiti Field and the Jack Field are even deeper, over 35,000 feet). The level of oil production within the Gulf has more than doubled over the past ten years (just under 2 million barrels per day), increasing to almost 30% of total domestic U.S. oil production. Leases on shallow water and deep water tracks are awarded to companies by a bidding process overseen by the U.S. government. The companies are responsible for any and all exploratory and drilling costs. The advantage of having a successfully producing well in the Gulf is its proximity to refining operations in Texas and Louisiana and the elimination of political risk.

According to the Alaska Oil and Gas Association crude oil production has been declining over the past several years: from 1,004,00 barrels per day in 2004 to 734,000 barrels per day estimated for fiscal 2008. Searching for additional supplies in Alaska's North Slope region has been hampered by a permanent trend in rising temperatures within the arctic region that reduces the amount of time the ground is in a permafrost state. State of Alaska environmental guidelines only allow large seismic prospecting vehicles in the region during the frozen season, which over the past decade has fallen to approximately 100 days. Whereas the U.S. Federal government would like to increase the amount of exploration on federal property, access to this property requires access to contiguous state property. Environmental groups are concerned over lengthening the access time and the permanent damage it will do to the tundra surface and the effect that it will have on local flora and fauna.

Venezuela

The greatest proportion of oil produced in Venezuela comes from the Orinoco Belt region (Orinoco River basin), which is located in the north central interior of the country. The type of crude oil located there is very heavy (less viscous than other crude sources), which requires substantial investment in technology and expertise to extract and to refine. Thus, this region was opened to the major oil companies who were provided with favorable concession and royalty terms and the country's oil company, PDVSA (Petróleos de Venezuela S.A.), operated as a neutral partner. In the past few years of the Chávez administration, PDVSA has become fully nationalized (it was actually nationalized in 1976 but operated as a private company in Venezuela), especially after the strike in 2003. The majority of the oil revenue is no longer maintained by the company for further exploration and investment but is utilized by the government for various expenditures (i.e. the company is no longer thought of as an "oil company" but as the government's primary source of funding for the Bolivarian socialist agenda). PDVSA subsidizes the price of gasoline in Venezuela (where domestic consumption is increasing annually; the local gasoline price is approximately 12¢ per gallon) and has also distributed heavily discounted oil to several nations within the Caribbean Basin and Central America.

During 2007, the holdings of all private petroleum companies were nationalized under the majority control of PDVSA (minumum 60% control by PDVSA). The country pledged to compensate the companies at market rates but ExxonMobil and ConocoPhillips decided to exit the country rather than surrender their claim. Thus, it is unclear whether Venezuela will be be able to maintain production levels if there is little or no investment in infrastructure by the company itself and no investment from private companies (for instance, during 2007 PDVSA reported that there is a shortage of oil drilling rigs in the country for new well drilling and the maintenance of existing wells). Similarly, the Paraguaná Peninsual Amuay oil refinery complex (located on the northwest coast) needs substantial investment. Secondly, almost 20,000 persons were fired from PDVSA during the strike and this included many experienced managers and workers who have not been adequately replaced. It is unclear what the actual barrels per day oil production output is: PDVSA claims that production has returned to pre-strike levels and that it produces approximatley 3.3 million barrels per day, however the International Energy Agency (IEA), the Organization of Petroleum Exporting Countries (OPEC) and the U.S. Energy Information Agency (EIA) all publicly indicate that production is probably closer to 2.5 million barrels per day.

Crude Oil

Crude Oil is a mixture of hydrocarbons that exists as a liquid in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities. Crude oil with a similar mix of physical and chemical characteristics, usually produced from a given reservoir, field or sometimes even a region, constitutes a crude oil "stream." Crude oils are classified by their density and sulfur content.

 

Sour or Sweet Crude: Industry terms which denote the relative degree of a given crude oil's sulfur content. Sour crude refers to those crudes with a comparatively high sulfur content, 0.5% by weight and above; sweet refers to those crudes with sulfur content of less than 0.5%. The terms Light and Heavy refer to the density (API gravity) of the crude.

 

Light, sweet crudes are preferred by refiners because their sulfur content and relatively high yields of high value products such as naphtha, gasoline, middle distillates, and kerosene allow them to be economically processed in the typical cracking refinery. The denser ("heavier") crude oils produce a greater share of lower-valued products with simple distillation and require additional processing to produce the desired range of products.

 

However, most of the world's crude oil supply is not made up of the light, sweet varieties, but consists of the so-called Sour, or higher Sulfur content crudes. Worldwide, about 60% of petroleum production and 80% of the economically recoverable oil reserves are sour.

 

Crude is the raw material which is refined into gasoline, heating oil, jet fuel, propane, petrochemicals and other products. The quality of the crude oil dictates the level of processing and re-processing 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 like West Texas Intermediate, the U.S. benchmark, has a relatively high natural yield of desirable naphtha and straight-run gasoline. Another premium crude oil, Nigeria's Bonny Light, has a high natural yield of middle distillates. By contrast, almost half of the simple distillation yield from Saudi Arabia's Arabian Light, the historical benchmark crude, is a heavy residue ("residuum") that must be reprocessed or sold at a discount to crude oil.

 

In addition to gravity and sulfur content, the type of hydrocarbon molecules and other natural characteristics may affect the cost of processing or restrict a crude oil's suitability for specific uses. The presence of heavy metals, contaminants for the processing and for the finished product, is one example. The molecular structure of a crude oil also dictates whether a crude stream can be used for the manufacture of specialty products, such as lubricating oils or of petrochemical feedstocks.

Crude Field /Type Names:

OPEC Reference Basket:

Arab Light

Basrah Light

BCF-17

Bonny Light

Es Sider

Girassol

Iran Heavy

Kuwait Export

Marine

Minas

Murban

Saharan Blend

 

Offshore

Arab Berri

Arab heavy

Arab light

Arab Super Light

Arab Medium

AMNA

Ardjuna

Arimibi

Arun Cond

Attaka

Bach 17

Basrah

Bekapai

Belayim

Bombay Hi

Bonny Light

Bonny Medium

Brass River

Brega

Brent: Brent blend is the world benchmark traded on the IntercontinentalExcahnge / ICE (formerly the International Petroleum Exchange) in London, UK.

Bu Attifel

Bunyu

Cabinda

Canolimon

Cinta

Daqing

Dubai

Duri

Ekofisk

Escravos

Es Sider

Escravos

Forties

Flotta

Gippsland

Handil

Hout

Iran Light

Iran Heavy

Isthmus

Khafji

Kirkuk

Kole

Kuwait

Labaun

Leona

Lower Zakum

Mandji

Maya

Minas

miri

Montrose

Murban

Ninian

Oman

Oriente

Pennington

Qatar Land

Qatar Marine

Qua Ibo

Ras Gharib

Saharan Blend

Salawati

Sarir

Seria Light

Shengli

Statfjord

Suez Blend

Tapis

Tembungo

Tijuana Light

Tijuana Heavy

Umm Shaif

Urals

Walio

Zarzaitine

Zuetina

 

Domestic U.S.

Alaska North Slope (ANS)

Louisiana

West Texas intermediate (WTI): A grade of crude oil deliverable against the New York Mercantile Exchange light sweet crude oil contract. Nominally, the benchmark crude of the U.S. oil industry.

West Texas sour (WTS)

Wyoming Sweet

Crude Oil Conversion Calculator:
(Do not enter any commas; A value can be entered in any one of the categories to determine the other 3)

Not every nation measures barrels per metric ton equally. The quick estimate for U.S. business is 7 barrels / 300 gallons per metric ton of oil. The actual number of barrels per metric ton will be different for different types of crude oil.

Barrels of crude oil per metric ton: Canada (7.180); Mexico (7.080); Trinidad & tobago (7.084); Venezuela (6.685); Netherlands (7.090); Norway (7.490); U.K. (7.560); Azerbijan (7.270); Russia (7.270); Bahrain (7.320); Iran (7.284); Iraq (7.414); Kuwait (7.258); Qatar (7.382); Saudi Arabia (7.403); UAE (7.558); Algeria (7.945); Libya (7.583); Nigeria (7.40); Brunei (7.340); China (7.320); Indonesia (7.418)   www.eia.doe.gov/pub/international/iealf/tablec2.xls   (.xls format)

Upstream Operations

Extraction of oil from a sub-surface reservoir is known as "upstream" operations.

Major Oil Companies (Upstream / Downstream)

Major Oil Field Service Companies (exploration, equipment and parts delivery and maintenance, operations, etc.)

Most of the oil fields are located in countries, and regions within those countries, where the largest consumers of the petroleum are not located or the capacity does not exist for product refinement. Thus, the oil must be transported over long distances. The most economical method of transporting oil is by pipeline. Petroleum pipelines are usually located under ground or run along the sea bed. In arctic regions the pipelines are laid above ground on stilts due to the permafrost.

For instance, crude oil extracted within the Caspian Sea region is pumped through the Baku-Tbilisi-Ceyhan pipeline (approximately 1,100 miles in length; operated by BP) from Azerbijan to Turkey. A second pipeline, the Baku-Supsa (operated by BP) extends from Azerbijan to Georgia.

NYMEX Contract

Crude oil is the world's largest volume physical commodity. Over the past decade the market for the NYMEX light, sweet (low sulfur) crude oil futures contract has developed into the World's most liquid form for crude oil trading. The Exchange's light, sweet contract, the world's largest volume futures contract trading for an underlying physical commodity, is a benchmark for international crude pricing. Cushing, Oklahoma, the contract's delivery point, is the nucleus of U.S. spot crude trading and is accessible to the international spot crude market via pipelines operated by ARCO Pipe Line Co. and Texaco Trading and 'Transportation Inc.

By providing for delivery- of several grades of domestic and international crudes, the NYMEX sweet crude contract is designed to serve the complex and diverse needs of the vast oil marketplace.

The sweet crude contract specifies delivery of six domestic and four foreign crudes. Producers, drillers, gatherers, traders, and refiners are among the main commercial users well suited to trade crude oil futures. Secondary commercial users include a broad spectrum of businesses with a financial interest in the petroleum industry.

For refiners and traders using the NYMEX heating oil and gasoline contracts, crude oil futures provide a unique opportunity to hedge and spread both the raw material and the finished products. Since crude and refined product prices can, and do, move independently of one another, the ability to spread trade crude and products (the "crack spread") provides the ability, to lock in refinery margins.

No. 2 fuel oil distillate contract

Refined Products

Crude oil is made up of a mixture of hydrocarbons (C_nH_n), thus the first and basic refining process is aimed at separating the crude oil into its "fractions," the broad categories of its component hydrocarbons. Each of these categories boils at higher temperature ranges, until the oil will not boil without thermally decomposing. Crude oil is heated and put into a still (a distillation column) and different fractions (products) boil off and can be recovered at different temperatures.

A barrel of oil yields these refined products (percent of barrel):

47% gasoline for use in automobiles

23% heating oil and diesel fuel

18% other products, which includes petrochemical feedstock—products derived from petroleum principally for the manufacturing of chemicals, synthetic rubber and plastics

10% jet fuel

4% propane

3% asphalt

(Percentages equal more than 100 because of an approximately 5% processing gain from refining.)

Refinery Gases

Refinery gases include Methane (CH₄; which is also the primary compound of natural gas), Ethane (C₂H₆), Hydrogen.

Liquified Petroleum Gases (LPG)

LPG includes Propane and Butane.

Propane

Propane (C₃H₈) is a highly flammable, colorless, easily liquefied gas (distilled at 90°F or lower) and sold bottled as a cooking fuel for barbecues, portable stoves, motor vehicles and residences. Propane is also used to power small motor vehicles such as buses and forklifts.

Butane

Butane (C₄H₁₀) is a highly flammable, colorless, easily liquefied gas (distilled at 90°F or lower) and sold bottled (at normal temperatures and pressures butane will evaporate) as a fuel for cooking and camping or as a fuel for cigarette lighters.

Aromatics (Solvents)

Aromatics include Benzene, Toluene, Xylene.

Benzene

Benzene (C₆H₆) is a highly flammable, colorless liquid with an aromatic odor, which is widely used mainly as a raw material for synthesizing chemicals such as styrene, phenol, and cyclohexane and for manufacturing dyes, detergents, explosives, rubber, plastics, and pharmaceuticals.

Gasoline

  NYMEX Light Sweet Crude Oil / Gasoline Crack Spread Futures

Straight-run Gasoline

One barrel (42 gallons) of crude oil, when refined, yields approximately 19.6 gallons of finished motor gasoline. Requires additional "inputs" during refining. Please see below.

Naptha

Naptha (also known as petroleum ether and petroleum spirits) is a highly flamable liquid, wich is sold in metal containers as a fuel for camping stoves and camping lanterns. More refined naptha is also used as a solvent or cleaning fluid.

Fuel Oils

  NYMEX Light Sweet Crude Oil / Heating Oil Crack Spread Futures

Fuel Oil - Refined petroleum products used as a fuel for home heating and industrial and utility boilers. Fuel oil is divided into two broad categories: distillate and residual. Fuel oils are less volatile than gasoline but distillate oils are more volatile and less viscous than residual oils.

Distillate fuel oils are produced from crude petroleum, which has been vaporized in a refinery distillation tower and had different fractions removed during the process. Distallate is further categorized as:

Residual fuel oils are what is left over after the petroleum distillation process where the lighter fractions (gasoline, kerosene, and distillate oils) have been removed from the crude oil and are more viscous than distallate oils and contain sediments.

No. 1 Fuel Oil Distillate

Kerosene or paraffin oil: colorless, low-sulfur, flammable liquid; Military Jet fuel (JP5 / Jet Propellant 5 and JP8) is distilled from No. 1 Fuel Oil (kerosene type fuels made to more exacting specifications than the commercial jet fuels; they also contain unique performance enhancing additives). Other refined jet fuels based on kerosene are JP4 and Jet A (commercial aircraft). Jet A is primarily supplied and used in the U.S., while Jet A-1 is supplied throughout the rest of the World. Jet A and Jet A-1 are both kerosene-type fuels. The primary physical difference between the two is the freeze point: Jet A must have a freeze point of -40º C or below, while Jet A-1 must have a freeze point of -47º C or below.

Please note: Aviation gasolines (AVGAS) are leaded fuels used in spark-ignition aviation engines, not jet aircraft.

No. 2 Fuel Oil Distillate

Consists of No. 2 Heating Fuel Oil and No. 2 Diesel Fuel.

No. 2 Heating Oil

No. 2 fuel is a light oil used for home heating (high-sulfur), in compression ignition engines (low-sulfur) and in light industrial applications. Heating oil (No. 2 Heating Fuel Oil), accounts for about 25% of the yield of a barrel of crude, the second largest "cut" after gasoline.

The Northeast United States uses more high-sulfur distillate fuel oil than any other U.S. region due to the older age of its residentail and commercial properties, accounting for more than two-thirds of the total consumption of distillate fuel oil in the U.S. residential and commercial sectors. The infrastructure of the distillate fuel oil industry in the Northeast begins with large distribution centers, which provide supplies to smaller distribution points that, in turn, supply thousands of retail dealers who deliver fuel to millions of homes.

U.S. Heating Oil Prices
Note: Price in Cents per Gallon. Source: Energy Information Administration (EIA)

No. 2 Diesel Fuel

Sometimes referred to as No. 2 Grade Diesel Fuel Oil, Diesel Motor Fuel No. 2 and High Sulfur Diesel Fuel. This same boiling range oil as No. 2 Heating Oil is used in warmer conditions as diesel fuel for larger land-based, on- and off-road engines, such as trucks, busses, earth moving and material lifting and moving equipment, farm equipment and railroad diesel locomotives. Please see below.

Also known as Marine Gas Oil (High Sulfur; DMX, DMA / Marine Distillate fuel A, DMB, DMC; Marine Diesel Fuel or Intermediate Fuel Oil / IFO).

No. 4 Fuel Oil Distillate / Residual

No. 4 fuel is utilized as a diesel fuel (low-sulfur) for boats and as a heating oil (high-sulfur).

No. 6 Fuel Oil Residual

No. 6 fuel, or outside the United States, known just as fuel oil, is a heavy fuel used in large commercial, industrial and electric utility boilers. Residual Fuel Oil is also referred to as bunker fuel, bunker C, and is left over from the distillation of crude petroleum after the lighter fractions (gasoline, kerosene, and distillate oils) have been removed and is usually blended with distillate / residual oil to make it suitable, with fuel preheating, for very large compression ignition engines in ocean-going ships (including container ships, tankers, bulk carriers, and cruise ships) as it is inexpensive (selling at a large discount to marine gas oil) but is also highly pollutant (emissions include higher concentrations of sulfur dioxide and nitrogen oxide; heavy metals; benzene and naphthalene are also found in bunker fuel).

On November 7, 2007, the American Chemical Society, Journal of Environmental Science and Tecnology, provided a research report that states "shipping-related particulate matter (PM) emissions are responsible for approximately 60,000 cardiopulmonary and lung cancer deaths annually, with most deaths occurring near coastlines in Europe, East Asia, and South Asia." (Mortality from Ship Emissions: A Global Assessment; Corbett, James J., et al.; Environ. Sci. Technol., Article, 10.1021/es071686z; Web Release Date: November 5, 2007 ). Given the projected continued growth of shipping, the particulate matter release volume can only increase. The U.S. Environmental Protection Agency (EPA) also agrees that these "Category 3 marine engines generate significant emissions of fine particulate matter (PM2.5), nitrogen oxides (NOx) and sulfur oxides (SOx)" and will become the major source of of these emissions in the United States, and is proposing tougher guidelines (Environmental Protection Agency, Control of Emissions from New Marine Compression-Ignition Engines at or Above 30 Liters per Cylinder; Advance Notice of Proposed Rulemaking (ANPRM), 40 CFR Parts 9 and 94; .pdf format). International Shipping is regulated by the United Nations International Maritiime Organization (IMO), which has been slow to debate and ratify more stringent standards for PM, NOx and SOx emissions due to the vast size and interests of its membership. One of the additional problems is that if these ships were to attempt to convert to cleaner distillate fuel oils then the cost of operations would increase significantly, even if there was enough additional refining capacity to begin providing increased fuel oil supplies because under present ouput levels it appears to be insufficient.

Petrochemicals & Lubricants

Petrochemicals include ethylene, propylene, butylene, and isobutylene, which are primarily intended for use as petrochemical feedstock in the production of plastics, synthetic fibers, synthetic rubbers, and other products. Lubricants are the result of a refining processes where additives such as demulsifiers, antioxidants, and viscosity improvers are blended into the feedstocks to obtain a desired viscosity.

Asphalt (Bitumen)

Asphalt is used in road surfacing. Asphalt (and coke) are almost pure carbon.

Gasoline

  NYMEX New York Harbor RBOB Gasoline Futures

  NYMEX Gulf Coast Gasoline Futures

  Energy Information Administration (EIA), U.S. Dept. of Energy - U.S. Retail Gasoline Prices

The United States is the largest gasoline market in the world: approximately 33% of all petroleum consumed for road transportation. According to the New York Mercantile Exchange (NYMEX), "Gasoline is the largest single volume refined product sold in the United States and accounts for almost half of national oil consumption."

In the United States, there are three types of refined gasoline sold at the service station pump to consumers:

Due to local reformulated / additive requirements, supplies in certain local markets can be tight when there is insufficient refining capacity to meet local demand.

Gasoline is further classifed by its octane grade / rating (Ocatane requirements in the U.S. vary based on the altitude of the sales region):

The Octane grade of a gas type is designed to prevent detonation or pre-ignition, which means that the fuel and air mixutre ignite at the wrong time due to the high compresssion and heat. Thus, the higher octane gas index is the more it will be resistant to detonation / pre-ignition.

Additives are primarily detergents added to the gasoline formula to assist in keeing the interior of the engine clean. The E.P.A. does require a minimum level of detergent added to gasoline. Any amount in excess of the E.P.A. minimum is solely at the descretion of the respective refiner / retailer and a aerketing decision by them.

In 2004/2005, several states in the U.S. (California, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Minnesota, Missouri, Nebraska, New Hampshire, New York, Ohio, South Dakota, Wisconsin, Washington) will or have already completely phased out the use of blending methyl tertiary butyl ether (MTBE) in reformulated gasoline (RFG). MTBE was originally added to gasoline to replace lead as an octane enhancer and to raise the oxygen content, however it was found that it was contaminating the local water supplies in states where it was being used. Although there is controversy surrounding MTBE, it is not listed as a carcinogne by the EPA or the World Health Organization (WHO). Some refiners will add fuel ethanol to the gasoline in the place of MTBE in order to satisfy state emission requirements. Two other oxygenates are TBA (tertiary butyl alcohol) and ETBE (ethyl tertiary butyl ether).

Once refined, gasoline can not be stored indefinitely as it does begin to degrade with the passage of time (it may be stored with a chemical stabilizer that will prolong the storage time). The maximum that it may be stored and still be utilized is 6 months to one year.

Retail Gasoline Prices
Note: Price in Cents per Gallon. Source: Energy Information Administration (EIA)

What is the breakdown of the price at the pump to consumers per gallon of gasoline? Increasingly, the cost of the crude oil itself is becoming the most expensive component.

Under the original terms of the Energy and Conservation Act of 1975, new passenger automobiles were required to meet the standard of 27.5 miles per gallon (mpg) by the 1980s. Under revised standards, new light trucks and SUVs sold in the United States must meet the standard of 22.2 mpg as of 2007. As per the National Highway Traffic Safety Administration (NHTSA), Corporate Average Fuel Economy (CAFE) is the sales weighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer’s fleet of passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8,500 lbs. or less, manufactured for sale in the United States, for any given model year. Fuel economy is defined as the average mileage traveled by an automobile per gallon of gasoline (or equivalent amount of o ther fuel) consumed as measured in accordance with the testing and evaluation protocol set forth by the Environmental Protection Agency (EPA).

There were 3 important court cases concerning motor vehicle emissions and automotive fuel economy in the United States during 2007:

 

In April 2007, the Supreme Court of the United States of America ruled that the U.S. Federal Government did indeed have the authority to regulate carbon dioxide emissions from motor vehicles. Under the terms of the decision the Environmental Protection Agency is required to present a plan to regulate motor vehicle emissions

In September 2007, a federal court judge in the State of Vermont ruled that the state(s) also have the authority to regulate carbon dioxide emissions from motor vehicles.

In November 2007, a federal appeals court judge invalidated the Bush Administration's light truck and SUV fuel economy standards reasoning that they did not accurately determine or measure the potential economic costs related to continued climate change.

In the United States, U.S. gasoline futures are traded on the New York Mercantile Excahnage. The NYMEX New York harbor unleaded gasoline futures contract and reformulated gasoline blendstock for oxygen blending (RBOB) futures contract trade in units of 42,000 gallons (1,000 barrels).

U.S. State Motor Fuel Excise Tax Rates

The Federal motor fuel excise tax is a flat 18.4 cents per gallon and is collected nationally. Each state in the United States has its own State Motor Fuel Excise Tax Rate (some are a flat rate per gallon and some are based on the dollar amount of the gasoline actually purchased).

  U.S. State Motor Fuel Excise Tax Rates (Gasoline, Diesel and Gasohol)

Diesel

  NYMEX Gulf Coast Ultra Low Sulfur Diesel (ULSD) Futures

  NYMEX New York Harbor Ultra Low Sulfur Diesel (ULSD) Futures

Diesel Fuel (From C₉H₁₆ to C₁₂H₂₃) is a distillate fuel oil used in compression-ignition engines. It is similar to home heating oil, but must meet a cetane number specification of 40 or more (A measure of the ignitability of diesel fuel, the cetane number serves a similar purpose as does the octane number of gasoline).

Diesel, as a fuel oil, is much more popular in Europe than in the United States. While diesel engines are much more efficient than gasoline engines, diesel fuel still has a high pollution particle content and NOx emission compared to gasoline.

There is a reformulated diesel fuel introduced in 2006 known as ultra low sulfur diesel (S15 ULSD), which is designed to be used by recent diesel engines in automobiles, trucks and buses. The U.S. Environmental Protection Agency (EPA) has set the sulfur content of this fuel at a specific ppm (parts per million). There are 3 categories: S15, S500 and S5000. S15, S500, and S5000 are designations for diesel fuels that meet 15 ppm, 500 ppm, and 5,000 ppm maximum sulfur content, respectively. ULSD and S15 are often used interchangeably in North America (U.S. and Canada) market.

Master Limited Partnerships (MLPs)

In the United States, some pipeline and storage facility infrastructure are owned by an investment vehicle known as a Master Limited Partnerships (MLPs). An MLP will make an investment in energy sector infrastructure with long economic lives in order to create a cash stream for investors. The properties are managed by a General Partner (an energy company with knowledge of the business) and Limited Partners put up cash to purchase an interest in the partneship. A Limited Partner unit pays a quarterly dividend to its holder (an MLP is required by law to pay out all of its cash flow in distributions). In addition, the MLP does not pay income taxes, rather the Limited Partner is responsible for dividend taxes at their level. Some tax is deferred until the Limited Partnership is sold and capital gains taxes are then paid. Limited Partnership units are transferable and their value is dependent on the value of the anticipated cash stream, which is dependent on the volume of oil, natural gas or refined products being moved through the system (thus the MLP is not entirely dependent upon the price fluctuation of energy products but rahter the overall demand for the commodity).

Alternative Energy Sources

Please see the separate Ethanol & Biofuels Page

Oil Sands (Heavy Oil)

By some measures, the largest proven deposit of petroleum in the world is located in Alberta, Canada. However, it is in the form of what is known as "heavy oil" or as tar sands, bitumen or oil sands, which is petroleum in a viscous, non-flowing form. The largest deposit, the Athabasca oil sands deposit, is extracted at the Aurora North mine on the Athabasca river near the town of Fort McMurray in the Regional Municipality of Wood Buffalo (RMWB). The 2 other large deposits in Alberta are at Cold Lake oil sands deposit (southeast of Fort McMurray) and at Peace River oil sands deposit (west of Fort McMurray).

  Google Map Location of Regional Municipality of Wood Buffalo (RMWB)

Petroleum production from tar sands first begins with excavating the upper layers of soil and rocks that cover the deposits. Excavation is on average approximately 100 feet of digging before reaching the tar sands so that the deposits can esssentially be strip mined. Underground deposits can also be accessed, however it is much more difficult to accomplish, energy intensive and substantially increases the cost of production per barrel. Excavated oil sand is then hauled by truck to crusher / grinders that pulverize the sands. By conveyer belt, the pulverized oil sands are transported to a cyclofeeder where it is mixed with hot water to produce a slurry. The slurry then passes through a centrifuge which separates bitumin, which is the oil-rich particle. The bitumin is heated in a coker to remove impurities, resulting in a liquified, low-quality heavy crude oil. This crude is then sent to a refiner. Approximately 1.3 million barrels of oil are produced from the tar sand deposits on a daily basis at mid-2008.

Oil sand deposits in Canada amount to approximately 171 billion barrels (Centre for Energy; Canadian oil reserves include an additional approximately 4.4 billion barrels of conventional oil). The addition of the inaccessible deep deposits adds to the reserves (unquantified). However, the ratio of unprocessed oil sand to finished crude is approximately 2 tons of sand per barrel thus one gets a sense of just how much material has to be moved and processed. It was also always thought that cheap natural gas would be utilized to provide the energy necessary to refine the tar sand. However, the increase of the price for natural gas over the past several years has substantially raised the price of producing usable crude from oil sand deposits. In addition, there is the issue of the winter weather that severely reduces the productivity of operations. The largest operators in this market in Canada are Syncrude Canada, Ltd., Albian Sands Energy Inc., and Suncor, which combined control approximately 50% of production from oil sands. Syncrude is majority owned by ConocoPhillips, Canadian Oil Sands Trust and Imperial Oil (which is majority owned by Exxon). In addition, in October of 2007, the Government of the Province of Alberta indicated that it would increase the oil and gas royalty rate from 47% to 64%, which some critics see as a threat to continued development. However, both Syncrude and Suncor operate under contracts that freeze the present royalty rate out until 2016.

The excavation and preliminary processing of tar sands creates considerable environmental problems. In addition to the consumption of energy and water to produce the low level petroleum, forest areas are cut down to provide access to deposits and large tailing ponds are created full of toxic chemicals dissolved in water and clay.

Algae

Certain strains of algae contain an oil that can be converted to a bodiesel fuel however the cost of production is quite high, presently exceeding the cost of petroleum fuels on a per gallon basis. If the cost could be brought down then algae ponds could be grown just about any where, especially on land not suitable for agriculture.

Alternative Automotive Design

These type of automobiles include the flex-fuel, biofuel, hybrid and electric.

The flex-fuel automobile is already widely in use in Brazil. This type of automobile runs on a higher combination of Ethanol additive to gasoline, as high as 85%. The nation of Brazil has an extensive amount of sugarcane under cultivation in sufficient quantity to allow the country to produce less expensive (compared to the United States) ethanol. The country has also already made an extensive investment in distribution infrastructure.

The hybrid automobile is an internal combustion engine with and electric engine backup. When one travels at a certain speed or slower (below 35 mph) the electric engine drives the automobile. Once one exceeds the pre-determined automatic cut-in speed level then the internal combustion engine turns on and drives the automobile. This type of automobile is already in production and being sold to the public (for instance, the Toyota Prius and the Ford Escape). Some of these automobiles are also designed such that if the brakes are engaged (regenerative braking) or the driver's foot is removed from the pedal then the motor can actually function as a generator and produce electrical energy to recharge the batteries. There is a grass roots operation in some parts of the United States to convert factory produced hybrids to plug-in hybrids (PHEV), which are like regular hybrids but with larger batteries and the ability to re-charge from a standard outlet and are sometimes modified to provide for longer electric motor use prior to the automatic cut-in of the internal combustion engine.

The electric automobile is exactly that: no internal combustion engine just an electric powered motor (thus no carbon emissions). This type of design requires that the batteries within the automobile be recharged periodcially depending on how often and how far the automobile is driven. The recharging of the batteries requires that the car is either connected to a home wall socket by an adapter cable or connected to a roadside recharging station. The recharging of the batteries via a standard 120 volt residential electrical connection takes approximately 6 to 8 hours. The recharging of the batteries via a 210 volt roadside recharging station takes approximately 3 to 4 hours. Some of these automobiles are also designed such that if the brakes are engaged or the driver's foot is removed from the pedal then the motor can actually produce electrical energy to recharge the batteries.

U.S. Federal 2008 Fuel Economy Tests   www.fueleconomy.gov/feg/ratings2008.shtml

U.S. Federal Car Efficiency Comparison   www.fueleconomy.gov/feg/findacar.htm

Carbon Trading / Carbon Offset & Renewable Energy Credits

Please see the separate Carbon Trading Page.

Petroleum and Refined Fuels Information Sources

Alaska Oil & Gas Association   www.aoga.org/

Alberta Energy   www.energy.alberta.ca/

American Petroleum Institute   api-ec.api.org/

Athabasca Regional Issues Working Group   www.oilsands.cc/

British Columbia Oil & Gas Commission   www.ogc.gov.bc.ca/

Canadian Association of Oil well Drilling Contractors (CAODC)   www.caodc.ca/

Canadian Association of Petroleum Producers   www.capp.ca/

Energy Information Administration (EIA)   www.eia.doe.gov/
EIA, Weekly Petroleum Status Report   www.eia.doe.gov/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/wpsr.html
EIA, Weekly Retail Gasoline and Diesel Prices   tonto.eia.doe.gov/dnav/pet/pet_pri_gnd_dcus_nus_w.htm
EIA, Gasoline and Diesel Fuel Update   //tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
EIA, This Week in Petroleum   tonto.eia.doe.gov/oog/info/twip/twip.asp
EIA, Weekly Supply Estimates   tonto.eia.doe.gov/dnav/pet/pet_sum_sndw_dcus_nus_w.htm
EIA, Country Analysis Briefs   www.eia.doe.gov/emeu/cabs/contents.html
EIA, International Petroleum (Oil) Consumption Data   www.eia.doe.gov/emeu/international/oilconsumption.html
EIA, International Energy Data & Analysis   www.eia.doe.gov/emeu/international/contents.html

Energy Ideas Clearing House   www.energyideas.org/

Federal Energy Regulatory Commission (FERC)   www.ferc.gov/

History and Analysis of Crude Oil Prices   www.wtrg.com/prices.htm

Independent Petroleum Association of America   www.ipaa.org/

International Association of Drilling Contractors   www.iadc.org/

International Energy Agency (IEA)   www.iea.org/

Minerals Management Service, U.S. Department of the Interior   www.mms.gov/

National Oil & Gas Assessment, U.S. Geological Survey   energy.cr.usgs.gov/oilgas/noga/index.htm

National Petroleum Technology Office (DOE)   www.npto.doe.gov/

Norwegian Ministry of Petroleum and Energy   www.regjeringen.no/en/dep/oed.html?id=750

Norwegian Petroleum Directorate   www.npd.no/   (Norsk / English)

Office of Fossil Energy (DOE)   www.fe.doe.gov/
Petroleum Reserves   www.fe.doe.gov/programs/reserves/

Oil & Gas Journal   ogj.pennnet.com/home.cfm

Oil Market Report, International Energy Agency   omrpublic.iea.org/

Oil Online   www.oilonline.com/

Petroleum Safety Authority Norway   www.ptil.no/

Renewable Energy, U.S. Department of Energy   www.eere.energy.gov/
Geothermal Energy, U.S. Department of Energy   www.eere.energy.gov/geothermal/

Society of Petroleum (SPE)   www.spe.org/

Society of Petroleum Evaluation Engineers (SPEE), SEC Reserve Definitions   spee.org/secdefinitions.htm

U.S. Department of Energy (DOE)   www.energy.gov/

U.S. Department of Energy Strategic Petroleum Reserve   www.spr.doe.gov/

World Petroleum Council   www.world-petroleum.org/

Alternative Automotive Design Resources

Cal Cars   www.calcars.org/

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