Released on January 22, 2009
(Next Release on January 28, 2009)

Refinery Yields

“Refinery yield” is the measure analysts use to assess how the breakdown of petroleum products coming from crude or unfinished oils varies over time. Refiners can adjust product yields in response to changing product prices and other market conditions. Yield changes are made by varying how refinery process units are used and the type of crude oil that is used. EIA receives many questions about yields, including how much they may vary, why they add up to greater than 100 percent, and how to estimate yields from weekly data, which does not contain adequate detail to determine refinery yields.

Table 1 shows low, average, and high monthly U.S. refinery yields for selected products during 2007, the latest period in which final annual data is available. Average gasoline yields at U.S. refineries averaged 45.5 percent during 2007. This means that 19 gallons of gasoline were produced from every 42-gallon barrel of oil processed at U.S. refineries. Similarly, 23 gallons were produced as distillate fuel oil, jet fuel, and other products.

Table 1 also shows the total of average refinery yields for all products in 2007 equals 106.3 percent. We call the increased volume of the products coming out of refineries compared to volume going in “refinery processing gain.” Refinery processing gain happens because in some major refining processes, like fluid catalytic cracking, volumes increase when large heavy molecules are broken into smaller and lighter molecules which take up more space. But even the best refineries can’t make something out of nothing, and the mass (or, in this case, the weight) stays the same--input equals output when measured in tons. Many analysts prefer to measure in gallons or barrels.

For most products, refinery yields are calculated as barrels of finished product produced divided by the sum of crude oil and unfinished oils inputs. However, calculating gasoline yields is more complicated as discussed below.

The yield calculation for finished motor gasoline is complicated because of blending. Total U.S. finished gasoline production includes gasoline produced at blending terminals as well as gasoline produced at refineries. Inputs used to produce finished gasoline at blending terminals include components that were imported as well as components produced in U.S. refineries. When calculating yields, U.S. total finished gasoline production must be corrected for the imported blending components, ethanol and some “other inputs”. The adjustments are illustrated in Figure 1.

Using EIA Petroleum Supply Annual data for 2007, we calculate finished motor gasoline yields like this:

Gasoline production reported weekly is actually the sum of refinery and blender net production as well as adjustments to account for unreported gasoline blending activity. (Gasoline adjustments were described in This Week in Petroleum on July 2, 2008.) Note that refinery and blender net production and adjustments are separate values in monthly and annual petroleum supply reports. Missing weekly values needed for yield calculations include net inputs of unfinished oils, and inputs of natural gas plant liquids, “other” hydrocarbons, hydrogen, and oxygenates (mainly ethanol).

Some analysts estimate refinery yields from weekly data by dividing weekly production values by crude oil inputs. This approach overstates actual gasoline yields because the weekly gasoline production includes volumes produced from imported blending components, volumes from ethanol and other inputs, and the fuel adjustment. The calculation further overstates the ratio by using just crude rather than crude and unfinished oils.

The degree of overstatement of weekly gasoline yields can be reduced, though not eliminated, by subtracting net inputs of motor gasoline blending components from gasoline production. Figure 2 shows monthly differences from January 2005 to October 2008 between actual gasoline yields and gasoline yields calculated using total U.S. gasoline production (refinery production, blender production, and adjustments) divided by crude oil inputs – the way weekly numbers would be calculated, but using monthly numbers to compare “apples to apples.”

Despite the tendency to overstate yields, the estimated weekly yields have some value as leading indicators of overall trends in product yields, if applied consistently over time. Analysts should carefully review any refinery yield data to fully understand the underlying data and calculation methods before interpreting the numbers or comparing them with other reported yield data that may have been calculated using different methods.

Changes to weekly surveys and published data proposed and planned for 2010 will allow analysts to make better estimates of weekly yields of finished motor gasoline. Refinery and blender surveys are being modified to collect inputs of fuel ethanol. Publication of weekly fuel ethanol inputs will permit fuel ethanol volumes to be subtracted from weekly production of finished motor gasoline. In addition, modified publication tables are planned to show refinery and blender production and adjustments as separate weekly data items.

Looking at refinery yields is a useful way to analyze refiner responses to differences in product prices and other market conditions. EIA’s monthly and annual data provide values needed to calculate refinery yields. Refinery yields calculated from weekly data are estimates, typically based on the yield-on-crude oil method of calculation, that tend to overstate actual refinery yields. Analysts should study the underlying data and calculations before interpreting refinery yields.

Residential Heating Oil Prices Drift Downward
Residential heating oil prices decreased once again during the period ending January 19, 2009. The average residential heating oil price receded 1.8 cents per gallon last week to reach 242.1 cents per gallon, which was 90.9 cents per gallon lower than this same time last year. Wholesale heating oil prices gained 0.3 cent, reaching the mark of 159.8 cents per gallon, which was a decrease of 98.6 cents per gallon compared to the same period last year.

The average residential propane price pushed slightly higher, rising 0.8 cent to reach 231.4 cents per gallon. This was a decrease of 24.9 cents from the 256.3 cents per gallon average for this same time last year. Wholesale propane prices trimmed off 0.8 cent per gallon, drifting from 91.3 cents to 90.5 cents per gallon. This was a decrease of 62.2 cents from the January 21, 2008 price of 152.7 cents per gallon.

Retail diesel prices dropped 1.8 cents to 229.6 cents per gallon. Prices are 97.4 cents per gallon lower than at this time last year. East Coast prices were down 1.8 cents to 237.7 cents per gallon. The Midwest tallied the largest decrease, 2.5 cents, to 226.4 cents per gallon, while the Gulf Coast saw a drop of 1.7 cents to 222.7 cents per gallon. The Rocky Mountain region had the only increase in prices, up 1.4 cents to 224.9 cents per gallon. The West Coast price slumped 1.5 cents to 233.8 cents per gallon. California prices declined 1.5 cents to 231.9 cents per gallon, still 104.1 cents per gallon lower than last year.

Cold Temperatures Continue to Push Propane Inventories Sharply Lower
The deep freeze blanketing most of the Midwest and East Coast continued to push propane inventories sharply lower last week, with inventories falling by 3.1 million barrels to an estimated 50.6 million barrels as of January 16, 2009. All regions experienced relatively sharp declines last week, with the Midwest showing the largest at nearly 1.8 million barrels. This was followed with a 0.5 million-barrel drop in both the Gulf Coast and East Coast regions during this same time. The combined Rocky Mountain/West Coast region lost 0.3 million barrels last week. Propylene non-fuel use inventories moved lower by 0.1 million barrels to account for a 7.3 percent share of total propane inventories, up slightly from the prior week’s 7.2 percent share.

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