Re: How much does it cost today to make a gallon of gas?

How much does it cost to make a gallon of gas?

That is a very direct question that can be answered many ways. I will attempt as simple an answer as possible.

First, I will offer my qualifications to answer that question. As a chemical engineer working in the engineering and construction industry, I have just finished a 10 month assignment working on redesigning a refinery owned by Conoco to process a very different, heavier crude oil than it starts with today. I have just started a project with Shell working on a refinery to... you guessed it...process a heavier crude oil than they process today.

Next, I will neglect taxes, separation levies, shipping costs and the multitude of incidental costs that raise the cost of a barrel of crude and a gallon of gas. For example, in Texas, where I live, about 37 cents per gallon in tax (the last time I looked). It will be different where you live.

The cost to make gasoline from crude oil depends upon the quality of the crude oil and where it is made. I will assume that you are interested in gasoline made in the united States only. In other countries, environmental safeguards may be lower and quality of gasoline less. Additives that reduce corrosion in the engine, reduce or eliminate knock (uneven burning), and promote even ignition and a well developed flame front add cost. Let's ignore those as well for now.

Crude oil is not a uniform material. Consider what you would get if you went to the grocery store and asked for a slice of cow? It is all cow, but would you prefer a rib roast, strip steak, tongue or tripe? Similarly, crude oil has different value depending upon where it comes from. Generally, the lighter (smaller molecules) and sweeter (lower in sulfur) and oil is, the higher the price. Some Libyan oils are so light that you can nearly put the cride oil in a diesel truck and drive away on it. Other oils, such as those from Venezuala, as so thick that they have to be heated to temperatures that would instantly burn you to get them to flow through a pipeline. As time goes on, the heavier oils are what we, the world, will have to turn into gasoline as the better, easier to process crude oils are fast being used up.

In a refinery, crude oil is turned into several products, with gasoline being the product of greatest demand and therefore the preferred product. Other products include heating oil, diesel fuel (several grades), natural gas-like fuel, jet fuel, and a product called gas-oil. The gas oil made of big molecules must be broken up to form gasoline and often some smaller molecules and some bigger molecules. That is called cracking. In reforming, straight molecules (waxy) are made into branched molecules to improve their energy production during burning and density. In alkylation, smaller molecules are knit together to make molecules the right size for gasoline. These processes are more expensive than ordinary distillation, but allow more gasoline to be made from typical heavy oils (about 90 to 97%) than is naturally in these heavy oils (about 15 to 30%). Don't forget about the costs of removing the sulfur from the oil and disposal of the waste products.

With all that information, how much does it cost to make a gallon of gasoline? The best answer can be obtained from the financial statements of a normal oil company that only processes oil. If you do, you will find that right now, they are making a profit of about 2% to 5% on the gasoline they make because there is too much gasoline available. Some are even losing money, but they can't lose too much money too long or they will go out of business.

Now you have the tools to answer the question. Since a barrel of oil has 42 US gallons and costs about $12. The cost per gallon is 35 cents in that case. If the tax totals 40 cents, the non-processing cost is about 75 cents. People (workers, management, engineers, etc.) add about 4 cents cost to each gallon. The distribution and sales probably add another 7 or 8 cents per gallon. Now the total is about 87 cents. If the gasoline sells for one dollar, the processing costs (capital to build a refinery, the energy to fire furnaces and create high pressure steam, waste treatment and disposal) cost cannot be greater than about 12 to 14 cents per gallon. In my opinion, this number may be a little high, but less than 8 cents per gallon is unrealistic and 10 or 11 cents is about right.

So the answer to a seemingly simple question has gotten a little long, but the truth about making gasoline is, it is an incredibly complex process and there are a wide number of sources of cost.

I hope this helps.