Overview of the Oil Industry

The oil market is a global market because oil and oil products can be easily stored and shipped around the world; all the regional markets are strictly interconnected.

Global demand for oil products is the fundamental driver of the oil industry: a relevant portion of the world economy and of the growing worldwide welfare still relies on oil product consumption, both for industrial production and for transportation. Oil products derive from the refining industry, which in turn needs the crude oil and consequently the exploration and production (E&P) industry. These different sectors, thus, are strictly linked, and the comprehension of the global market requires a deep understanding of the whole process, from the oil well to the final consumer.

According to the IEA (International Energy Agency) world oil demand in 2007 was about 86 million barrels per day (one barrel equals 159 litres or 42 US gallons), and has been constantly increasing in the last 25 years (see chart).

Oil demand growth has driven the increase of refinery runs which were at about 75 million barrels per day (short: b/d) in 2007; the gap between demand and refinery throughput (more than 10 million b/d) depends mainly on three elements: 1) the output of a refinery, on a volumetric basis, exceeds the input because of the chemical transformations during the refining process; 2) a portion of the demand is satisfied with the direct burning of  crude oils and NGLs (natural gas liquids: liquids deriving from natural gas fields); 3) another part of the demand is covered by bio-fuels or by other materials from different sources, such as petrochemical industries.

Refining capacity has been historically above actual crude throughputs, but during the last decades it has grown at a much slower pace if compared to demand, especially in the last five years. Refinery utilization, as a consequence, increased significantly and is now above 85%, very close to what is considered to be the real maximum operating rate (100%, in fact, represents the theoretical nameplate capacity, and is based exclusively on the primary distillation capacity without considering in many cases the presence of conversion and desulphurization units which is a key issue for today’s industry)

Useful links:
www.bp.com
www.doe.gov
www.oilmarketreport.org
www.unionepetrolifera.it