Transport Fuel Rationing in the USA: Part 6 Can re-tooling oil refineries save us?

In Part 4 (http://crash-watcher.blogspot.com/2010/09/transport-fuel-rationing-in-usa-part-4.html) of this series it became pretty clear that my proposed oil import disruption from sources outside of the western hemisphere would cause a major 35% shortfall in oil. In particular this would cause the amount of available dfo (diesel) to fall short of the USA’s critical infrastructure needs. An about 27 MB dfo/d shortfall, I estimated in part 4.

The question I address here is, could oil refineries adjust their refining processes to produce relatively more diesel and less gasoline, to help mitigate this diesel shortfall?

A portion of Csere’s 2008 article sheds some light onto this:

Al Mannato, a fuel-issues manager at API, explains that oil refineries tend to fall into two categories: catalytic cracking and hydrocracking. Most U.S. refineries are set up for catalytic cracking, which turns each barrel of crude oil into about 50-percent gasoline, 15-percent diesel, and the remainder into jet fuel, home heating oil, heavy fuel oil, liquefied petroleum gas, asphalt, and various other products. In Europe and most of the rest of the world, refineries use a hydrocracking process, which produces more like 25-percent gasoline and 25-percent diesel from that barrel of oil. So the rest of the world is already maximizing diesel production. In fact, despite using a refining strategy that minimizes the production of gasoline, Europe still ends up with too much of the stuff, so it exports it to America—about one of every eight gallons of gasoline that we consume.

Doing so—and here’s the Catch-22—would reduce the output of gasoline and likely increase its price. Moreover, such a switch, Mannato explains, amounts to a major refinery change that would take 5 to 10 years to accomplish. Building some new hydrocracking refineries would add diesel capacity without squeezing gasoline supplies, but due to their nearly universal unpopularity, there hasn’t been a new refinery built in America since 1979.

Despite the merits of modern diesels, anyone who expects them to solve our energy problems stands to be disappointed.

Meanwhile, Americans are already using most of the diesel fuel that our refineries produce, so if sales of diesel cars take off, keeping the diesel flowing here will put further demands on tight worldwide diesel supplies and probably cause the price to rise even more. Our oil industry could, of course, start converting its refineries from catalytic to hydrocracking and start producing more diesel and less gasoline. (http://www.caranddriver.com/features/08q2/should_american_vehicles_go_diesel_just_when_the_world_is_running_short_of_it_-column)

Mannato’s explanation gives some insight into how much diesel USA refineries could theoretically be capable of producing, if they all shifted from gasoline-centric catalytic cracking, to diesel-centric hydrocracking.

Mannato estimated that shifting from catalytic cracking to hydrocracking of oil would:

1) decrease gasoline production by 50% (i.e., “50-percent gasoline” to “more like 25-percent gasoline”

2) increase dfo production by 166% (i.e., “15-percent diesel” to “25-percent diesel”)

(Notice that the increased amount of diesel produced is relatively less than the decrease in the amount of gasoline produced; more on this important point later.)

I have applied these percentages to my previous estimates of gasoline and dfo usage in the USA based on the numbers I extracted from the AER 2009 report, and, for my hypothesized “disruption” event, to calculate the maximum changes in proportions of gasoline versus dfo that might be attainable in the USA:

Present usage, per AER 2009 report levels:

gasoline: 368 MG gas/d (catalytic cracking) ===> 184 MG gas/d (hydro-cracking)

diesel: 152 MG dfo/d (catalytic cracking) ===> 253 MG dfo/d (hydro-cracking)

Predicted usage during the disruption (i.e., a 35% shortfall in oil):

gasoline: 240 MG gas/d (catalytic cracking) ===> 120 MG gas/d (hydro-cracking)

diesel: 99 MG dfo/d (catalytic cracking) ===> 164 MG dfo/d (hydro-cracking)

The good news is that now we are making enough dfo to meet the USA’s critical dfo requirements, which I estimated to be about 126 MG dfo/d. We are also still making enough gasoline to meet the USA’s critical dfo requirements, which I estimated to be about 52 MG gas/d.

The bad news is that this has been done at the cost of producing much less gasoline (i.e., whooping 120 MG gas/d less) for the relatively smaller amount of diesel gained (i.e., 65 MG dfo/d more). That would mean a much more severe gasoline ration than I originally calculated in the first post, which assumed no change from catalytic cracking to hydro-cracking.

For instance, after setting aside the gas needed for critical uses, I get:

120 MG gas/d – 52 MG gas/d = 68 MG gas/d

Per USA household, that leaves: (68 MG gas/d) / 105 M hh = 0.65 G gas/d•hh

This is a lot less than the 2.2 G gas/d•hh ration that I originally estimated (in Part 4), when I assumed no change from catalytic cracking to hydro-cracking. I don’t think that many households in the USA would be able to function very well on 2/3 of a Gallon of gasoline per day!

A better solution would be a partial conversion from catalytic cracking to hydro-cracking, to provide just enough diesel to meet the critical dfo needs and not make the household ration of gasoline so severe.

For instance, consider the case where we only convert one-half of the refineries over to hydro-cracking (that is, a “combo” of the two cracking processes):

Present usage per AER 2009 report levels:

gasoline: 368 MG gas/d (catalytic cracking) ===> 276 MG gas/d (combo-cracking)

diesel: 152 MG dfo/d (catalytic cracking) ===> 202 MG dfo/d (combo-cracking)

Predicted usage rates during the disruption (i.e., a 35% shortfall in oil):

gasoline: 240 MG gas/d (catalytic cracking) ===> 179 MG gas/d (combo-cracking)

diesel: 99 MG dfo/d (catalytic cracking) ===> 131 MG dfo/d (combo-cracking)

Now we have just enough to meet the critical uses for diesel (126 MG dfo/d), and, we have gained back about 59 MG gas/d over that meager 120 MG gas/d amount available from an all hydro-cracking process.

Again, after setting aside the gasoline needed for critical uses, I get:

179 MG gas/d – 52 MG gas/d = 127 MG gas/d

Per US household, that leaves: (127 MG gas/d) / 105 M hh = 1.2 G gas/d•hh

This is still a lot less than the 2.2 G gas/d•hh ration that I originally estimated in Part 4, assuming all catalytic cracking, but it is substantial higher than 0.65 gas/d•hh, assuming all hydro-cracking.

The estimated ration, 1.2 gallons per household per day, gives a total average daily driving distance of only 24 miles per house hold, assuming 20 mi/G. That’s 20 miles less than the total average daily driving distance that I originally estimated in Part 4, but at least the critical infrastructure needs for both gasoline and diesel are met.

Okay, that was the bad news, here’s the really bad news.  Repeating a portion of that quote from Csere’s article:

Moreover, such a switch, Mannato explains, amounts to a major refinery change that would take 5 to 10 years to accomplish. Building some new hydrocracking refineries would add diesel capacity without squeezing gasoline supplies, but due to their nearly universal unpopularity, there hasn’t been a new refinery built in America since 1979.

I think it’s safe to assume that, in the present economy and political climate, no new oil refineries have been built since Csere’s 2008 article was written. And even if it took half the time, e.g., to convert only half the refineries, we are still looking at a 2½ to 5 year period. And of course, as Mannato pointed out, during the change-over period, the lack of output from that refinery would squeeze the gasoline and dfo supply even more.

Based on this analysis, I would not change any of my predictions:

1) A sudden disruption of oil import would still impact the critical infrastructure uses of diesel more severely than the critical infrastructure gasoline uses, because the conversion of significant numbers of existing refineries to perform hydrocracking would take at least 2½ to 5 years.

2) A more gradual decline in oil imports, such as predicted by the export-land model, will still cause diesel shortfalls sooner than gasoline shortfalls, unless there was a concerted effort on the part of oil refining company’s to convert their plants to hydrocracking refineries. In the present economy and political climate, I don’t see this as very likely.

3) Even if there were to be a steady movements towards producing increased amounts of diesel (and I have not seen evidence to support this), clearly I would not recommend owning a diesel vehicle, at least if you are going to rely on conventional supplies of diesel, because the competition for diesel for mostly critical uses, will always jeopardize your access to the conventional supplies.

And now, I can add a fourth point:

4) If there is an extended shortage of diesel due to an oil import disruption, the effort to convert USA refineries to produce more diesel for critical infrastructure uses, will take too long to prevent shortages in diesel, and, that conversion will directly, and almost doubly, cut into the amount of gasoline being produced, thereby making household rationing more severe.