"cazzyodo" (cazzyodo)
10/14/2015 at 15:25 • Filed to: Gas
13
20|
"cazzyodo" (cazzyodo)
10/14/2015 at 15:25 • Filed to: Gas | 13
| 20 |
Nymphicus Hollandicus asked about top-tier gas earlier and I wrote up a summary of where gas comes from. I realized that I should give it a share.
Call it the birds and the bees of the American fuel industry.
Now, bear in mind that I am by no means an authority on the subject. The fuel industry is immensely complex and far-reaching but I was fortunate enough to get exposure to many parts of the industry, visit a variety of terminals, pipeline headquarters and main junctions. I also attended project update meetings for one of the largest pipeline companies in the country. So I may not know much about a specific thing but I know plenty of specifics about a lot of things.
!!!error: Indecipherable SUB-paragraph formatting!!! (text below):
I was in supply chain for fuel for a couple years before I got a new job this summer. I scheduled gas across the country for our company and only heard minor differences in top tier gas.
Here’s a general overview of the process:
- Refiners produce gas of various grades based on the raw oil they receive. Yields for each type vary slightly based on where it comes from.
- Pipelines publish schedules for moving product along their lines. These schedules use “cycle” timing through the year. A major one along the east coast sets the standard.
- Refiners sell their product through brokers to various customers (other refiners, suppliers, jobbers, wholesalers, etc).
- Refiners input product into the pipelines in accordance to the published schedule and the pipeline tracks the product movement for the owner (whoever bought the product) to see when the product arrives. Destinations are determined by the owner’s scheduler and the scheduling system used by the pipeline.
- Regular gasoline is a fungible product, which means it is all interchangeable. You don’t own a specific gallon...you get the quantity you bought out of the enormous batch moving that cycle.
- Terminals (destinations) have large tanks to hold product. Your regular generic gas is mixed with Shells awesome gas and Mobil’s whatever they call it. There isn’t a difference. Yet.
- Trucks arrive at the rack (where they load and unload product) and key in codes to pick up product from a specific supplier (you or Mobil or Shell).
- The product that gets placed in the truck is dependent upon what the supplier specified with the terminal as their blend. Traditional blend is the gas with 10% ethanol (very few locations still ship and use straight gas) and the mandated additives. Anyone can sell top tier gas if they pay for it (a few extra cents per gallon, really). I was told that “it’s the difference between one squirt of additive and three squirts of additive per gallon.” It is a known quantity and anyone can sell top tier. Joe Schmoe’s Convenient Store could advertise top tier gas if they bought it. Branded stations aren’t terribly special.
What branded stations have are their own blends of additives. Shell does a few extra things that Mobil doesn’t. Etc. Etc. Your research can be spot on but I was also told that the way our vehicles are built today, you’d be fine.
I saw prices posted for branded and unbranded gas from the same supplier. The $.10 difference (let’s say it’s that amount) guarantees supply, basically, to the branded stations. They are the first ones to get the gallons at the terminal before other contracts are fulfilled. If a hurricane hits and gas is short, unbranded gas could run up and out but branded stations will be the last ones with fuel in their tanks.
I should have just posted this to Oppo and linked it...got carried away.
Anywho, hope it helps!
deekster_caddy
> cazzyodo
10/14/2015 at 15:31 |
|
It’s a very, very complex industry and I love learning more about it. I thought you were going to discuss where it came from, as in the sources to which refineries, but I’m just as pleased reading about the pipelines used for delivery!
|
cazzyodo
> deekster_caddy
10/14/2015 at 15:35 |
|
Yeah, I don’t know enough about that process to put even a paragraph together. My experience is solely dealing with the scheduling portion of the industry: deals, movement, supply. That was my primary function (along with market analysis and such) but my position gave me exposure to learn a lot more (hedging, pricing strategy, street margins).
The people in the industry are very willing to teach because much of them have as many years at their job as I have years in my life.
GhostZ
> cazzyodo
10/14/2015 at 15:35 |
|
- Regular gasoline is a fungible product, which means it is all interchangeable. You don’t own a specific gallon...you get the quantity you bought out of the enormous batch moving that cycle.
So gas can be used as currency?
I like the sound of that.
|
cazzyodo
> GhostZ
10/14/2015 at 15:36 |
|
I told a terminal manager that if they gave me access to some gallons I would send them a lovely Christmas card...so kinda?
Jack Does Cars
> cazzyodo
10/14/2015 at 19:57 |
|
You see the red section in North Carolina, which is connected to the long blue line? Yeah, part of the red bit goes right across my front yard. Kinda scary sometimes. Especially when the oil company decides to come on and destroy your entire front yard because there’s a problem with a seosor.
f86sabre
> cazzyodo
10/14/2015 at 20:34 |
|
Very cool. Thanks for sharing. It always amazes me how much simpler in some ways and more complex in others things can be.
I was “lucky” enough to experience first hand how important pipelines are when the main one running from Louisiana to Atlanta was shut down for a couple of weeks after Katrina. A major city running out of fuel is a freaky thing.
|
cazzyodo
> Jack Does Cars
10/14/2015 at 21:42 |
|
Whoa... You know the company?
|
Jack Does Cars
> cazzyodo
10/14/2015 at 23:05 |
|
They’ve changed name’s so many times, and if you Google the name on the signs, nothing relevant comes up.
|
cazzyodo
> Jack Does Cars
10/15/2015 at 11:17 |
|
Must be a smaller line, then, because the major ones in the area are Plantation (owned by Kinder Morgan) and Colonial. There are offshoots of privately owned ones and then some that don’t even move fuel but ammonia and other products.
|
Jack Does Cars
> cazzyodo
10/15/2015 at 13:10 |
|
It says Colonial on the signs, but they go by some different name now.
|
cazzyodo
> Jack Does Cars
10/15/2015 at 13:21 |
|
Should still be Colonial but possibly maintained by other companies. They have a few lines that head east towards Selma.
|
Jack Does Cars
> cazzyodo
10/15/2015 at 15:32 |
|
I’m pretty sure that’s the case. I think it’s one of those, “we the oil company want basically no responsibility because we’re in the business of making money, so we’re going to hire a subcontractor to actually be responsible, and if they mess up under our watch, it technically wouldn’t be our fault,” kind of deals.
|
cazzyodo
> Jack Does Cars
10/15/2015 at 15:42 |
|
Not quite because Colonial is insane. This could be just because it’s off the main line.
I went to Colonial’s hq outside Atlanta and holy crap it was intense. Their scheduling room is biometrically locked and reinforced with bulletproof glass/kevlar walls. They take everything very serious because they are actually the standard bearer for petroleum pipelines in the country. Other large pipelines operate off of what Colonial does in regards to scheduling.
They constantly look to upgrade equipment and maintain the integrity of the line because any downtime prevents them from making money (their income is based off of the total number of gallons moved so any delays reduces income). The fact that they move about somewhere around 1/4 of the country’s gas also keeps them on their toes.
|
Jack Does Cars
> cazzyodo
10/15/2015 at 16:57 |
|
As you can tell, I’m not really an expert on the oil industry. Nonetheless, those are some real interesting points you bring up.
|
cazzyodo
> Jack Does Cars
10/15/2015 at 16:58 |
|
I’m not either (disclaimed!) but it’s fun to theorize a bit.
gmporschenut also a fan of hondas
> cazzyodo
10/18/2015 at 18:13 |
|
What are your thoughts on the keystone pipeline?
I have a crazy neighbor who seems to think that it will mean $1.00 gas.
|
cazzyodo
> gmporschenut also a fan of hondas
10/18/2015 at 21:06 |
|
I don’t follow it so I don’t have thoughts but, to put it lightly, your neighbor is an idiot. Even with domestic supply increasing the industry will return to normal in about two years.
That was the prevailing consensus when I left. We’d be looking at gas back at $3.50-$4.00 at the pump. It’s just the nature of the industry for refiners to make money again. They’ve been operating at nearly break even levels and at the lowest point there were rumblings of shut downs but it would have cost more to stop and restart production than to temporarily process below cost.
That all being said, the market has been insane these past three years and nobody has any real idea how things will act. A wildcard has been ethanol and the renewable fuel mandate. Lots of conflicting interests from farms to refiners.
|
Jack Does Cars
> cazzyodo
10/22/2015 at 16:45 |
|
Today, Colonial gave us a letter saying that they’re going to cut down half of our trees again. Thanks, guys!
|
cazzyodo
> Jack Does Cars
10/22/2015 at 18:22 |
|
That’s about right. I forgot to mention that CP as a whole is a company of pompous, self-righteous douches. They were a pain to get a hold of when I needed some assistance and solutions always had a fee. I like the primary pipeline in the middle of the country way more.
|
Jack Does Cars
> cazzyodo
10/22/2015 at 18:38 |
|
Big Oil honestly pisses me off all the time.