Originally Posted By: philipp10
Originally Posted By: paulri
Part of the issue for me is what that "look at what we make out of a barrel of crude oil" pic really means (see the second to the last post on page 1 of this thread).
If in fact the entire contents of a 40+gallon barrel of crude is needed to make 2.5 quarts of motor oil, then it seems hard to say that this is the most efficient use of resources, when we can make a lot of gasoline (a lot more than 2 quarts) with the same barrel. Which in turn would mean that it is best to recycle used oil, as the specs on that are about 1 gallon of used oil, to make 2.5 quarts of "new" motor oil.
But if they make all that gas, AND the 2.5 quarts of motor oil, *from the same barrel,* then it seems like we might as well refine a bit of it to make motor oil. We really aren't taking away the ability to do lots of things with the crude oil, by refining a small part of each barrel into motor oil.
if it took an entire barrel of oil to make 2.5 quarts of oil, what would be the price of the quart? It would be astromical. They get 2.5 quarts of oil and lots of other products from each barrel.
The correct way to price that 2.5 qt / barrel is: how much is the next most profitable item you can hydro crack that 2.5 qt of lube base oil into after the processing cost overhead.
If it cost 20c to crack 1 gallon of base oil into gasoline and gasoline is selling for $2 / gallon at the refinery terminal, then lube base oil has to sell for around $1.80 / gallon to justify the price.
Then you work your way backward to get the rerefined base oil price (say $1.70 if you are blending it into lube oil without telling your customer, or $2 if you are selling to gov to meet their rerefined oil mandate), so if $1.80 for finished based oil and $1.2 to rerefine, then the gallon of used oil must be below 60c after transport, and likely less if you want to make a profit to stay in business.
All that math would collapsed into negative region if the crude oil price tank, and you end up having to charge people to haul away the used oil to justify rerefine, or even pay people to take away the used oil and use it as bunker fuel.