[nothingtolove]

Dear all,

I'm a newbie. Now i have to calculate refinery gross margin, but i don't know exactly the formula for each intermediate stream, such as Light/Heavy naphtha, isomerate, reformate, light gas oil... I only have the price of final product from Platt's.

Pls help me.

[pup55]

Hello, Nothingtolove....

Gross margin depends on the actual unit that is doing the production. You have to know the product mix of the production unit or refinery for which you are doing the calculation.

A lot of this information is actually in the shareholders' report for some of these companies, I think Tesoro actually publishes the unit-level product mix....

But, to make a long story short....As soon as you have the product mix, you can estimate it by estimating the selling price of the output minus the feedstock price, which is usually some function of WTI....You also have to convert everything into the same units, since crude oil is priced in barrels, and the products are priced in gallons.

So today, for example, in a unit that produces 60% gasoline and 40% diesel, it's like this:

Gasoline sales price *.6 (which for today is 2.31/gal)
plus
diesel sales price *.4 (which for today is 2.25/gal)

the sum of that is about $2.28 per gallon, which is the weighted average sales price for the products.

multiply by 42 to get dollars per barrel, it's about 96 selling price per barrel for the products, minus today's WTI price is about 86, so that's a $10 per barrel gross manufacturing margin.

Since every refinery produces a slightly different product mix, the gross margin of each of these places is known by the people that run them.

Also note that not everybody uses WTI, some refiners that can use cheaper feedstock and have a favorable product mix can be a lot more profitable than others.....

and also note that is the very thing that is driving a lot of these people to have financial problems right now, because that $10 is not really high enough for them to reinvest in their plant. I will say though that today, at $10, they are a lot better off than they were a couple of months ago when it was 8....