The Refining Industry

The petroleum industry includes the global processes of exploration, extraction, refining, transportation and marketing of petroleum products. The key products of the industry are middle distillates, gasoline, fuel oil and aviation fuels.

The industry is divided into two major components, upstream and downstream:

• Upstream refers to the exploration, development and production of crude oil or natural gas.

• Downstream refers to the refining of crude oil and the marketing of refined petroleum products.

The Oil Industry - click to enlarge

Refining is primarily a margin-based business where both the feedstocks and refined petroleum products are commodities. Refiners create value by selling refined petroleum products at prices higher than the costs of acquiring crude oil and other feedstocks. The oil refining industry operates in a global business environment. There is worldwide demand for crude oil, other feedstocks and refined petroleum products, all of which are transported at relatively low costs by sea and by pipeline between geographic regions. There are approximately 650 oil refineries worldwide, with about 130 operating in greater Europe.