Monday, April 26, 2010

Why is crude oil as expensive as refined gasoline?

1 barrel = 34 gallons for $89.00


89 devied by 34= $2.62.Why is crude oil as expensive as refined gasoline?
Well, for one, a barrel is 42 gallons of crude





Strangely enough though, only about half of that after refining is gasoline.





There are several more products however that come from the residuals. There is a net gain from the additives included in the refining process. one 42 gallon barrell of oil results in approximately 49 gallons of petroleum products. Some of these products like petroleum based lubricants sell for much higher prices than a gallon of gasoline. For instance a spray lubricant that is petroleum based may sell for 2 or 3 dollars but only be 12 ounces in volume.








If 50% of the refined product (approx 24.5 gallons) are made into products that sell for much higher prices than gasoline, then the gasoline portion needs to attain less sale price to make up the difference.





For instance, if the 24.5 gallons of other products that come from one barrell of refined oil can sell for $500 and thwe 24.5 gallons of gas sell for $3.00 a gallon, then the cost of the crude is much lower than the final product.








Take a random product for instance. ';CRC 3-36'; industrial lubricant. It is a petroleum based product derived from crude residuals from the refining process. This stuff sells for $7.00 for an 11 ounce can. As there are 128 ounces in a gallon, then one gallon of the stuff would sell for $81 per gallon. With part of the barrel going for this type of price after refining, you will find that the cost of crude being compared to the price of gasoline is fairly insignificant compared to the potential profit in the other products. Theoretically you could pay more for a gallon of the crude than you sell a gallon of the gas and still make profit off the other products. See the last link for information on types of actual profit derived from one barrelWhy is crude oil as expensive as refined gasoline?
Well look 1 barrel of crude can make up to 3 barrels of refined gasoline as well as amounts of tar, natural gas, kerosene, diesel, and car oil.


So just for arguments sake


1 barrel=34 gallons for say $90.00.


34*3=102 gallons


90/102=$0.88 a gallon.
1 bbl=42 gallons

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