Refiners boost profits with low-quality crude oil

March 13, 2005
BY BRAD FOSS ASSOCIATED PRESS

Like bartenders putting cheap alcohol into their cocktails, some U.S. refiners are reaping huge profits these days by relying on lower quality crude oil to make everything from gasoline to diesel.

The difference is that, unlike martinis mixed with barnyard booze, these finished fuels, after a little extra work, are the same quality as those made with top-shelf ingredients and therefore fetch the same high price from consumers.
The world’s premium oil is described as light, sweet crude and most refiners prefer it because it is low in sulfur, easy to process and yields the most volume per barrel of the transportation fuels in greatest demand. This preference has been magnified by environmental laws that require the industry to produce cleaner burning fuels.

But as the world’s oil thirst swells to more than 84 million barrels a day and producers struggle to keep up, the extra supply being brought onto the market, primarily by Saudi Arabia, is the heavy, sour variety. Trouble is, not all refiners have the equipment needed to process it.

As a result, the already high price of light, sweet crude has been magnified, with each barrel selling for more than $50 on futures markets. By contrast, there is a relative abundance of medium to heavy crudes that sell for much less and that puts refiners who can process it in a very good position.

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