This is a guest post by Stephen Bowers (TOD user carnot) who works for Evonik, a major chemical company based in Germany. Stephen is a petroleum chemist with over 30 years experience and started his career as a mud logger drilling oil wells.

Product Demand and Disposition

Global refining capacity is in a state of flux. In the main, the refining capacity in the OECD countries is in a mature state, with refineries aging and struggling to achieve the necessary returns for re-investment. This is particularly relevant for Europe and Japan where refining margins have been poor for decades. The same applies to an extent in the US, although there has been more investment in upgrading in the US than Europe. It would be not hard to reason that high taxation of fuels may have been partly to blame. Irrespective of your point of view, the fact that refining margins are so poor - typically $2-5 per barrel - it is no surprise that much rationalisation is taking place on the mature markets.

It is worth looking at the typical disposition of the products from a barrel of oil and Chris Skrebowski's (of Peak Oil Consulting) slide Fig. 1 does it well.

In this series of tech talks, I have been writing about the progress of crude oil as it passes from the reservoir up through the production casing, and out to the GOSP, where water, oil, natural gas, sand and sulfur products can be separated. The example video that I referred to last week dealt with treating Canadian Oil Sands, and the oil that is coming from them.

What I want to talk about today is the differences that exist in what to some folk is just "crude oil," with the assumption that it is all the same. In writing about coal, it is fairly simple to show that the different stages of coal as it changes from peat to anthracite. This means that you get different amounts of energy from it, and it can be extracted with differing amounts of energy. The fact that there is a fair bit of difference in crude oils is not always as easily understood. This then will be a relatively simplistic look at the different potential hydrocarbons that might make up a crude oil, and how we can get them apart.

Crude oil is made up of a mixture of hydro-carbons, which are the different ways in which carbon and hydrogen can combine, starting with such simple compounds as methane (CH4) and progressing to more complex ones with greater numbers of carbon atoms.

Not too long ago, I nearly quit writing, because I was losing control of my free time. I came to a compromise solution that has worked out well for me: I have continued to write, but I have reduced time dedicated to debates, correspondence, and addressing questions or criticisms about my essays. It is now apparent that it was not the writing, but instead the peripheral stuff that was really eating up all my time.

However, as a result of the change, some comments and questions that are directed at me go unanswered. Sometimes someone will make a criticism or comment that I would like to address, but I know it will lead to several more responses. In order to "catch up" with some of this without once again getting involved in protracted exchanges, on my way out of town for a business trip I put up a brief post inviting readers to ask questions or make comments. I hadn't originally intended to post it here, but there were quite a few topics that have been discussed at length here at TOD. So, I went through, picked out some of the questions, and took a stab at answering them.

There are questions on biobutanol, gasoline inventories, refinery margins, debunking, ethanol, investing, the future of the oil industry, where to live to ride out Peak Oil, and whether I have now lost hope. I sometimes excerpted the questions, but I linked to the originals so you can see them in complete context.

Introduction

In Part I, I discussed the short term factors that have resulted in the recent, rapid increase in the price of gasoline. But there are a number of underlying, long-term issues that have been major contributors. I will attempt to address them and answer a number of related questions, such as: Why have no new refineries been built in the past 30 years? Are U.S. refineries breaking down more than normal? Are oil companies purposely withholding supplies to keep prices high? Have environmental regulations played a role? Does the use of ethanol influence gasoline demand growth? The answers to some of these questions may surprise you.