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What’s in Your Barrel? A Breakdown of Refined Products and Price Implications


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Information updated from the original post date of 9/28/2018.

Consumers are often familiar with the gas and diesel used in their own passenger vehicles, but where does that fuel come from? Most people are unaware that the gas in their car comes from the same barrel of crude oil that makes the asphalt we walk on or jet fuel.

That is why it is important for large consumers of fuel—like shippers and carriers—to pay attention to changes in any single refined products market. Slight changes to one fuel type can result in price changes in others that ultimately increase their operating costs.

Price dynamics of petroleum products can change based on geography, market fundamentals, industry tendencies, and behind-the-scenes refining complexities. It is important to gain insight into the relationship each refined product has with the marketplace to properly manage fuel costs that move goods to market.


Factors that Influence Refined Product Outputs

Each refining operation is unique and has some degree of control over the mix of refined products they produce. The portfolio of finished goods a refinery brings to market, and its corresponding market value, is dependent on several key factors:

  • Type of Crude Oil (Crude Slate)

  • Refining Capabilities

  • Market Demand

  • Variance By Geography

Let’s dive into how each of these factors affects crude oil outputs.

Type of Crude Oil

While valuable in their own respect, not all types of crude oil are created equal. Two main subcategories of crude oil exist – light/sweet, and heavy/sour. An economy’s interaction with the global crude oil market will be largely dependent on what kind of crude oil they have available.

Light/sweet crude oil contains far less sulfur than its counterpart, making it easier to clean during the refining process. It is known for its quality and is scarce in the marketplace, trading at a premium. Light/sweet crude oil is commonly used to produce large amounts of gasoline and ultra-low sulfur diesel (ULSD).


Conversely, heavy/sour crude contains higher levels of sulfur—more than 0.5 percent. Because it is a “dirtier” type of crude it is more expensive to refine and process. This is creating new challenges for refiners amid a changing regulatory landscape.

Refining Capabilities

The degree to which a refinery can produce each fuel type is dependent on the type of refinery infrastructure available. The type of crude oil influences what is more economically viable for the refinery to produce, but the refinery operations ultimately make it possible.

Cleaner burning fuels like Ultra-Low Sulfur Diesel (ULSD) or gasoline require more complex refining operations, whereas “dirty” fuel types do not. As the global crude oil landscape shifts toward cleaner-burning fuels, refineries are pressed to continue to update and innovate within their refining infrastructure to keep pace.

Investment in technology not only contributes to the type of refined product output but also increases efficiency. The US is in a state of energy abundance as a result of large investments in its refining infrastructure, which has positioned itself well to benefit from premiums on ULSD.

Market Demand

Gasoline and ultra-low sulfur diesel comprise approximately 70 percent of a typical barrel of refined product outputs. These products require cleaner crude and more complex refinery operations to obtain. Because gasoline is a consumer-focused product, the role of demand and consumer sentiment is emphasized and can motivate the mix of a refiner’s slate of finished products depending on its market.

For example, US infrastructure is tailored to produce predominantly gasoline. As demand for conventional fuels remains strong, refiners are incentivized to continually update technology and innovate their operations. This has become increasingly important in the current crude oil landscape, where the US has become a major player.

Variance by Geography

Across the globe, the composition of a barrel of refined products varies based on the above criteria—the type of crude extracted or imported, refining capabilities, and shifting market demand.

The map below highlights the breakdown of refined products for the Organization of the Petroleum Exporting Countries (OPEC) nations compared to the United States. Though OPEC is largely recognized for crude oil production, the cartel accounts for approximately 30 percent of global refined product outputs. The pie charts indicate substantial differences in the output of residual fuels, as the lower refinery complexity of OPEC nations results in greater production of heavier, less valuable petroleum products like residuals.

Each nation’s product disposition varies greatly, further revealing the uniqueness of each refining region and the price implications that exist.

Crude Oil Barrel Breakdown

A standard 42-gallon barrel of crude oil yields approximately 45 gallons of salable refined products. The finished goods brought to market vary significantly in price, use cases, and demand.


Gasoline is considered the most important and most prevalent refined product throughout the US refining landscape, accounting for 20 gallons of a 45-gallon barrel of refined fuels.

Gasoline is primarily used as fuel for standard passenger vehicles. It is often sent to fuel blending terminals where blending agents are added to stay compliant with ethanol requirements to be infused with “brand-related additives,” such as those within Shell V-Power®NiTRO+ Premium Gasoline.

Regular, Midgrade, and Premium – also referred to as unleaded, super, or super-premium – are the different grades of gasoline sold by retailers. Differing grades have a wide array of uses, and this differentiation is the main reason refineries are not typically responsible for producing consumer-ready products.

Ultra-Low Sulfur Diesel (ULSD)/Heating Oil

Since the application of advanced emission control technologies by the Environmental Protection Agency in 2006, refineries are required to convert to ULSD production. Nearly all diesel products available in the United States are of the ultra-low sulfur variety.

Ultra-low-sulfur diesel makes up the second-largest portion of a refined product barrel, equating to roughly 11 gallons of the finished product. Various states regulate the percent of biodiesel required by both highway and off-road users, which ULSD is also eligible for blending use.

Heating oil, which is chemically identical to ultra-low sulfur diesel, is used as a fuel oil for furnaces or boilers in commercial and residential buildings. This is particularly the case in the Northeast region of the United States. Due to the comparable composition of ULSD and heating oil, the two products are often priced interchangeably, but regional price dynamics often create significant commodity price variance by geography relative to baseline heating oil. The key differentiator in selling price is taxation, as road diesel is subject to fuel taxes further down the product supply chain. Together, ULSD and heating oil make up 12 gallons of a refined barrel.

Kerosene/Jet Fuel

Kerosene is a light petroleum distillate commonly used as fuel in heaters, cooking stoves, water heaters, and lamps. Multiple grades of kerosene exist, though specifications vary depending on means of utilization.

Kerosene-type jet fuel is created via similar refining techniques, though distinct specifications through aircraft configuration differentiate generic kerosene from jet fuel. Kerosene-type jet fuel has both commercial and military use for jet and aircraft engines. Kerosene and kerosene-type jet fuel account for roughly 4 gallons of a standard barrel of refined products in the US combined.

Hydrocarbon Gas Liquids

A typical barrel of refined products in the US consists of approximately 2 gallons of hydrocarbon gas liquids (HGL). Hydrocarbon gas liquids are chemically grouped into alkanes or alkenes depending on carbon content, temperature, and pressure that each HGL converts to a liquid or gas.

Under atmospheric pressure, HGL occurs as gas, while higher pressures result in HGL liquids. Alkanes include ethane, propane, butane, and natural gas. Ethylene, propylene, and butylene fulfill the alkene category. In short, hydrocarbon gas liquids are used as feedstock to make various chemicals, plastic products, and synthetic rubber. HGLs are also used as fuels for heating, cooking, transportation, additives for gasoline, and blending agents for crude oil.

Residual Fuel

Residual fuel is a more general classification for fuel oils that ultimately remain after distillates and lighter HGL has refined away during the refining process. Residual fuels are segmented into two key categories, Number 5 and Number 6.

Number 5 residuals are used in powerplants and steam-powered vessels, while number 6 residuals are used for electric power generation, space heating, and by ocean vessels as bunker fuel. Production of residual fuels makes up one of the smallest portions of a barrel of refined products in the United States, accounting for just 1 gallon of refined output.

Other Products

Petroleum coke, still gas, asphalt, naphtha, lubricants, waxes, and other miscellaneous refined products fall into this category of refined products. Though the number of products in this category are marginal, the quality and breadth of these goods are instrumental across various industries with numerous uses. Six gallons of refined products make up this section of a barrel, though it is important to note the products in this category are regularly dependent on the production of other products within this classification.

The pie chart below shows the full breakdown of a typical barrel of refined products produced by US refiners.

Implications of a Changing Regulatory Environment

In recent history, regulatory changes related to energy and emissions continue to become more stringent and more complex. Because of the intermingled nature of refined products, it is important for shippers to pay attention to major changes in any fuel market. Though the fuel type affected may not be used to fuel their supply chain, it may release shockwaves across the crude oil refining process—which could ultimately influence prices in other sectors of the shipping industry.

One of the most pressing pending regulations that have the greater transportation industry paying attention is the implementation of the International Maritime Organization’s (IMO) upcoming sulfur regulations for bunker fuels.

This change will have noteworthy impacts on the prices of refined fuels outside of the residual fuel variety. Low-sulfur fuels, such as ultra-low sulfur diesel, will be heavily impacted as distillate supplies will be used as a blendstock for high-sulfur residual fuels.

The Energy Information Administration estimates 2 million barrels per day of consumption will transition from high-sulfur fuel to low-sulfur fuel, ultimately creating supply pressure for low-sulfur fuels on a global scale. As a result, the increased demand for distillate fuels will drive prices of ULSD upward. Refining dynamics and pricing structures will drastically change as the federal mandates approach.

Read more about how the IMO 2020 sulfur regulations will impact over-the-road diesel prices.

Futures markets indicate the value of residual fuel will decline until a willing buyer emerges, creating significant financial consequences for refiners. Essentially, the residual fuels historically called upon by ocean vessels for waterborne freight movements will need to find a new target market.

This presents refiners with a decision regarding how they will face the impending changes and how the demand for low-sulfur products will impact numerous refining operations.

Adapting the Crude Oil Market for IMO 2020

Changes to refinery configurations will be of key importance as the IMO 2020 mandates come to fruition. The added complexities created from shifting product demand will force refiners to adjust their business operations, both from an economic and a supply-demand perspective. Refineries have several options to react to IMO 2020 shifting demand:

  1. Change their mix of crude oil inputs that later influence the type of refined product outputs

  2. Change the configuration of the refinery altogether to enable increased production of low-sulfur products

  3. Combine these two options

  4. Make no changes and simply ramp-up production of existing products to maximize profitability and limit the extensive capital expenditure associated with changing the overarching refining operations

The comprehensive side effects associated with the IMO 2020 sulfur mandates will impact all aspects of the oil and refined product industry. Regions heavily-focused on the production of residual fuels will need to create a plan of action to stay competitive in a low-sulfur dependent future. Similarly, geographies with vast quantities of low-sulfur fuels will be called upon to create bunker fuels that stay compliant with the IMO regulations.

Demand will shift, the supply of numerous petroleum products in a refined barrel will succumb to sustained pressure, and the ensuing prices connected to these fuels will ultimately feel the brunt of the changes. The IMO 2020 regulations will transform the oil and refined product industry, creating an interesting dynamic for transportation supply chains.

Though IMO 2020 is currently center stage, shippers should know that post-implementation the shift to low sulfur options will not be over. Looking to future strategies that remain ahead of the regulatory landscape and manage fuel accurately and transparently will be of greatest benefit to supply chain participants.

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