PMM determines refinery fuel use by refining region for purchased electricity, natural gas, distillate fuel, residual fuel, liquefied petroleum gas, and other petroleum. The fuels (natural gas, petroleum, other gaseous fuels, and other) consumed within the refinery to generate electricity from CHP facilities are also determined.

Both domestic and imported crude oils are aggregated into five categories as defined by API gravity and sulfur content ranges.  This aggregation of crude oil types allows PMM to account for changes in crude oil composition over time. A composite crude oil with the appropriate yields and qualities is developed for each category by averaging characteristics of foreign and domestic crude oil streams. 

The following distinct processes are represented in the PMM:

Natural gas plant liquids (ethane, propane, normal butane, isobutane, and natural gasoline) produced from natural gas processing plants are modeled in PMM. Their production levels are based on the projected natural gas supply and historical liquids yields from various natural gas sources. These products move directly into the market to meet demand (e.g., for fuel or petrochemical feedstocks) or are inputs to the refinery. 

PMM contains submodules which provide regional supplies and prices for biofuels: ethanol (conventional/corn, advanced, cellulosic) and various forms of biomass-based diesel: FAME (methyl ester), biomass-to-liquid (Fisher-Tropsch), and renewable (“green”) diesel (hydrogenation of vegetable oils or fats). Ethanol is assumed to be blended either at 10 percent into gasoline (conventional or reformulated) or as E85. Food feedstock supply curves (corn, soybean oil, etc.) are updated to USDA baseline projections; biomass feedstocks are drawn from the same supply curves that also supply biomass fuel to renewable power generation within the Renewable Fuels Module of NEMS. The merchant processing units which generate the biofuels supplies sum these feedstock costs with other cost inputs (e.g., capital, operating). A major driving force behind the production of these biofuels is the Renewable Fuels Standard under EISA2007. Details on the market penetration of the advanced biofuels production capacity (such as cellulosic ethanol and BTL) which are not yet commercialized can be found in the PMM documentation. 

The linear programming portion of the model provides unit prices of products sold in the refinery regions (refinery gate) and in the demand regions (wholesale). End use markups are added to produce a retail price for each of the Census Divisions. The mark ups are based on an average of historical markups, defined as the difference between the end-use prices by sector and the corresponding wholesale price for that product. The average is calculated using data from 2000 to the present. Because of the lack of any consistent trend in the historical end-use markups, the markups remain at the historical average level over the projection period. 

State and Federal taxes are also added to transportation fuel prices to determine final end-use prices.  Previous tax trend analysis indicates that state taxes increase at the rate of inflation, while Federal taxes do not.  In PMM, therefore state taxes are held constant in real terms throughout the projection while Federal taxes are felated at the rate of inflation.¹⁸

Motor vehicle fuel in PMM is categorized into four gasoline blends (conventional, oxygenated conventional, reformulated, and California reformulated) and also E85. While federal law does not mandate gasoline to be oxygenated, all gasoline complying with the Federal reformulated gasoline program is assumed to contain 10 percent ethanol, while conventional gasoline may be “clear” (no ethanol) or used as E10. As the mandate for biofuels grows under the Renewable Fuels Standard, the proportion of conventional gasoline that is E10 also generally grows. California reformulated motor gasoline is assumed to contain 5.7% ethanol in 2009 and 10 percent thereafter in line with its approval of the use of California’s Phase 3 reformulated gasoline. 

EIA defines E85 as a gasoline type but is treated as a separate fuel in PMM. The transportation module in NEMS provides PMM with a flex fuel vehicle (FFV) demand, and PMM computes a supply curve for E85. This curve incorporates E85 infrastructure and station costs, as well as a logit relationship between the E85 station availability and demand of E85. Infrastructure costs dictate that the E85 supplies emerge in the Midwest first, followed by an expansion to the coasts.

By definition, Ultra Low Sulfur Diesel (ULSD) is highway diesel fuel that contains no more than 15 ppm sulfur at the pump.  As of June 2006, 80 percent of all highway diesel produced or imported into the United States was required to be ULSD, while the remaining 20 percent contained a maximum of 500 parts per million.  By December 1, 2010 all highway fuel sold at the pump will be required to be ULSD.  Major assumptions related to the ULSD rule are as follows: 

• Highway diesel at the refinery gate will contain a maximum of 7-ppm sulfur. Although sulfur content is limited to 15 ppm at the pump, there is a general consensus that refineries will need to produce diesel below 10 ppm sulfur in order to allow for contamination during the distribution process. 
• Demand for highway grade diesel, both 500 and 15 ppm combined, is assumed to be equivalent to the total transportation distillate demand. Historically, highway grade diesel supplied has nearly matched total transportation distillate sales, although some highway grade diesel has gone to non-transportation uses such as construction and agriculture.

Natural gas, coal, and biomass conversion to liquid fuels is modeled in the PMM based on a three step process known as indirect liquefaction. This process is sometimes called Fischer-Tropsch (FT) liquefaction after the inventors of the second step.  

The liquid fuels produced include four separate products: FT light naphtha, FT heavy naphtha, FT kerosene, and FT diesel. The FT designation is used to distinguish these liquid fuels from their petroleum counterparts. This is necessary due to the different physical and chemical properties of the FT fuels. For example, FT diesel has a typical cetane rating of approximately 70-75 while that of petroleum diesel is typically much lower (about 40). In addition, the above production methods have differing impacts with regard to current and potential legislation, particularly RFS and CO2.