How do oil companies make money?

Aimster

Lifer
Jan 5, 2003
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a barrel of oil has 42 gallons

OPEC is selling a barrel of oil for $60

After refining it is brought down to 20 useable gallons

that is $3.00 a gallon + tax.

Am I doing the calculations wrong?

Gas is not $3.00/gallon.

So how much does it cost the oil companies for 1 gallon?
 

dullard

Elite Member
May 21, 2001
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Originally posted by: Aimster
Am I doing the calculations wrong?
Yes you are doing it wrong. You forgot the other 22 gallons are sold at high prices. Jet fuel anyone?

 

Meuge

Banned
Nov 27, 2005
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Originally posted by: Aimster
a barrel of oil has 42 gallons

OPEC is selling a barrel of oil for $60

After refining it is brought down to 20 useable gallons

that is $3.00 a gallon + tax.

Am I doing the calculations wrong?

Gas is not $3.00/gallon.

So how much does it cost the oil companies for 1 gallon?
Gasolene isn't the only commercial petroleum product. There are chemicals, plastics, etc...
 

CycloWizard

Lifer
Sep 10, 2001
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I also suspect that most oil companies achieve better than 50% conversion of crude to gasoline, though this information is proprietary.
 

dullard

Elite Member
May 21, 2001
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Originally posted by: CycloWizard
I also suspect that most oil companies achieve better than 50% conversion of crude to gasoline, though this information is proprietary.
It varies greatly, often on the desired amount of gas/diesel/heating oil to be produced. Estimates vary, but they are all close to having 50% of oil going to gasoline.
 

Meuge

Banned
Nov 27, 2005
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Originally posted by: dullard
Originally posted by: CycloWizard
I also suspect that most oil companies achieve better than 50% conversion of crude to gasoline, though this information is proprietary.
It varies greatly, often on the desired amount of gas/diesel/heating oil to be produced. Estimates vary, but they are all close to having 50% of oil going to gasoline.
It also varies depending on the oil field. Lighter oils are far easier to convert then heavier ones... but heavy oils are easier to convert to plastics.
 

EatSpam

Diamond Member
May 1, 2005
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Oil companies make money by gouging the public, buying politicians, and helping those politicans start phoney wars.
 

zephyrprime

Diamond Member
Feb 18, 2001
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Rifining isn't the only way oil companies make money. They also get a piece of the cut from the initial sale of the barrel of oil at $60 as mentioned by the OP. This is where the real money is. Refining and selling gasoline only makes a modest profit. Selling oil for $60 makes mega bucks. The average barrel of oil in the world only takes $6 to extract. The local governments take a big cut but you're still looking at huge margins from selling something that takes $6 to produce @ $68.
 

CaptnKirk

Lifer
Jul 25, 2002
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There was a time that what we refer to as 'gasoline' was a waste product - the leftovers from refining petroleum to get the 'good stuff' out.
Those were in the days of 'cracking' - distiling and selective condensation.
Now they use catalytic methods, adding select materials at discreate quantities to modify the residues.
This method expands the product volume to more than the original gallon/quantities.

Some student wrote a pretty good report
 

techs

Lifer
Sep 26, 2000
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Oil companies make money because it costs them as little as 5.00 per barrel or less to pump in parts of the US.
Even difficult to drill wells in ocean water rarely cost more than 10-12 per barrel.
 

ntdz

Diamond Member
Aug 5, 2004
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Originally posted by: EatSpam
Oil companies make money by gouging the public, buying politicians, and helping those politicans start phoney wars.

Yeah, because oil companies weren't profitable 50 years ago either, right?
 

Meuge

Banned
Nov 27, 2005
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Originally posted by: ntdz
Originally posted by: EatSpam
Oil companies make money by gouging the public, buying politicians, and helping those politicans start phoney wars.

Yeah, because oil companies weren't profitable 50 years ago either, right?
Who says they didn't do the same things then. Heh.

In any case, I don't think it's news that there will always be people who will do ANYTHING for profit.
 

CycloWizard

Lifer
Sep 10, 2001
12,348
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Originally posted by: techs
Oil companies make money because it costs them as little as 5.00 per barrel or less to pump in parts of the US.
Even difficult to drill wells in ocean water rarely cost more than 10-12 per barrel.
That's true. However, one needs to consider the costs of building some of the most complex structures on earth to actually get at the oil underneath the ocean. That, and actually finding the stuff.
 

tommywishbone

Platinum Member
May 11, 2005
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Little known secret... Exxon, Shell, Texaco, etc. make zero profit on gasoline sales, they rake in the big dough by selling those little glow-in-the-dark key chains & super big gulps, when you go inside the store. ;)