|SIf the assumptions on this slide are
correct, then what would result?
|SIf refinery conversion capacity were in
fact running at maximum utilization,
then the only way to increase light product production would be to
increase refinery crude oil input.
|SIf the conversion capacity had also been at
maximum throughput, then residual fuel oil yield would rise as refinery
throughput increased. If the added input were light crude oil, then
the residual fuel yield increase would be small, but if the feed increase
were mostly heavy high-bottoms-content crude oils, then the residual fuel yield increase would
be much larger.
|SThese assumptions might mean that some
refiners would prefer more light crude oil because they could produce more
light products per barrel of input and avoid large increases in residual fuel
oil production. But how can we tell if refiners “only want more light
barrels” or even mostly want light crude oil?
A higher price for light sweet crude oil relative to heavy sour crude
oil does not mean that demand for light crude oil has increased or that
refiners only want light sweet crude oil.
It does mean that the relative value of the heavy crude oil has
diminished because of its higher yields of lower-valued products.
|S Keep in mind that, under these assumptions,
refiners with or without bottoms conversion capacity are in the same
situation. They can increase light
products production by running more
barrels of input, but neither can avoid additional residual fuel oil
|S To analyze the validity of the assumptions we
need to look at refinery input and outputs in 2004, and particularly focus on
residual fuel oil yields and production levels.