4 ms·

you know what's even more interesting, it seems like shipping fuel is heavily subsidized. The international price for bunker fuel is about $330 per ton. Oil is

you know what's even more interesting, it seems like shipping fuel is heavily subsidized. The international price for bunker fuel is about $330 per ton. Oil is $50 per barrel, a barrel is about 300 lbs, so 7.5 barrels make a ton. That's $375. Why is the refined product cheaper than the raw product? edit: many have responded calling residual fuel a "waste product" - it is useful and being used so calling a waste product strikes me as semantically incorrect. If it were being sold opportunistically, like a large proportion of it was going to waste but some was being sold, I would agree with that, but it seems like it's all being sold, right?

rjsw 10y ago
My guess would be that the other distillate fractions from each barrel have been sold for a lot more.
mschuster91 10y ago
> Why is the refined product cheaper than the raw product? Because bunker fuel is the absolute waste that remains after the refinery distills all the valuable lighter fuel components (from pretty heavy kerosene all up the way to gasoline and even lighter). The stuff basically has no other use except as fuel for tankers... what refineries are doing here is, basically, selling waste they'd otherwise have to spend money to get rid of it. (On a sidenote, I can't imagine how one could get rid of bunker fuel except pumping it back where it came from)
- dredmorbius 10y ago
  Well, there's also petroleum coke, though you're broadly correct. https://en.m.wikipedia.org/wiki/Petroleum_coke https://en.m.wikipedia.org/wiki/Petroleum_coke
- jerkstate 10y ago
  Come to think of it, the same is true for gasoline. No other use for it than to run combustion engines. Turns out we are all doing those oil companies a pretty big favor, unless we used their product, they would have to pump all of those distillates back into the ground.
  - mschuster91 10y ago
    > No other use for it than to run combustion engines. Ordinary gasoline is a powerful solvent and cleaning agent. This is, interestingly enough, the reason that Bertha Benz refueled her car in the world's first long-distance automobile journey, in a pharmacy - it was sold as "Waschbenzin" at the time, which translates to "washing gasoline".
mikeash 10y ago
I think it's basically a waste product from refining which happens to find some use. It's like how slag is cheaper per ton than the ore it comes from.
stordoff 10y ago
Is that because bunker fuel is (more or less) the remainder after the lighter components have been distilled out?
deleted 10y ago
[deleted]
nickjarboe 10y ago
It is because oil in a barrel contains many different parts. Refining is mostly just distillation. Chemically changing the product is sometimes done but is much more complicated and expensive. With just distillation, one will get everything from butane to kerosene to fuel oil [1]. The light parts (lower boiling point) are generally more valuable, with fuel oil as the gunk left over (also used for asphalt). This is also why "light" crudes are more valuable than "heavy" crudes. [1] https://www.eia.gov/todayinenergy/detail.php?id=6970 https://www.eia.gov/todayinenergy/detail.php?id=6970
vpribish 10y ago
crude oil is $50/bbl it has not been refined yet - the heavy fuel oil that ships use is a relatively undesirable leftover from refining crude into gasoline, diesel, and kerosene. oh, fun fact: you get more than 1bbl of refined products out of 1bbl of crude.
snovv_crash 10y ago
If I made a blend of gravel and gold, and sold it by the barrel at cost price, once you pick out the gold the price of the remaining gravel per barrel will be a lot less than the price of the blend per barrel.

rjsw 10y ago

My guess would be that the other distillate fractions from each barrel have been sold for a lot more.

mschuster91 10y ago

> Why is the refined product cheaper than the raw product? Because bunker fuel is the absolute waste that remains after the refinery distills all the valuable lighter fuel components (from pretty heavy kerosene all up the way to gasoline and even lighter). The stuff basically has no other use except as fuel for tankers... what refineries are doing here is, basically, selling waste they'd otherwise have to spend money to get rid of it. (On a sidenote, I can't imagine how one could get rid of bunker fuel except pumping it back where it came from)

dredmorbius 10y ago
Well, there's also petroleum coke, though you're broadly correct. https://en.m.wikipedia.org/wiki/Petroleum_coke https://en.m.wikipedia.org/wiki/Petroleum_coke
jerkstate 10y ago
Come to think of it, the same is true for gasoline. No other use for it than to run combustion engines. Turns out we are all doing those oil companies a pretty big favor, unless we used their product, they would have to pump all of those distillates back into the ground.
- mschuster91 10y ago
  > No other use for it than to run combustion engines. Ordinary gasoline is a powerful solvent and cleaning agent. This is, interestingly enough, the reason that Bertha Benz refueled her car in the world's first long-distance automobile journey, in a pharmacy - it was sold as "Waschbenzin" at the time, which translates to "washing gasoline".

mikeash 10y ago

I think it's basically a waste product from refining which happens to find some use. It's like how slag is cheaper per ton than the ore it comes from.

stordoff 10y ago

Is that because bunker fuel is (more or less) the remainder after the lighter components have been distilled out?

deleted 10y ago

[deleted]

nickjarboe 10y ago

It is because oil in a barrel contains many different parts. Refining is mostly just distillation. Chemically changing the product is sometimes done but is much more complicated and expensive. With just distillation, one will get everything from butane to kerosene to fuel oil [1]. The light parts (lower boiling point) are generally more valuable, with fuel oil as the gunk left over (also used for asphalt). This is also why "light" crudes are more valuable than "heavy" crudes. [1] https://www.eia.gov/todayinenergy/detail.php?id=6970 https://www.eia.gov/todayinenergy/detail.php?id=6970

vpribish 10y ago

crude oil is $50/bbl it has not been refined yet - the heavy fuel oil that ships use is a relatively undesirable leftover from refining crude into gasoline, diesel, and kerosene. oh, fun fact: you get more than 1bbl of refined products out of 1bbl of crude.

snovv_crash 10y ago

If I made a blend of gravel and gold, and sold it by the barrel at cost price, once you pick out the gold the price of the remaining gravel per barrel will be a lot less than the price of the blend per barrel.