Case Study of an industry

Oil Refining

Cheung Yee On
6SS
( 09 )
 What is Oil Refining ?
- Is an industry which refine crude oil into more useful petroleum products, su
ch as gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied pet
oleum gas by fractional distillation.

- Is a weight gaining industry.

*Petroleum refining results in output greater than
the input because of changes in the overall density
of the refined products relative to that of the input
oils.

- The major raw materials required is crud

e oil and water (for cooling).
 Ideal location for Oil Refining Industry
- Since oil refining is a weight gaining industry, according to Weber
Model, the least-cost location should be at the market.
- The cost can be reduced when fully utilizing the refinery facility for oil
refining, pipes and vessels for large batch distribution and transportation.
Therefore oil refining industry should be located nearby. Therefore, oil
refineries should located nearby in order to saving cost by economic of
scale.
- Since oil refineries is a heavy industries, it requires extensive flat land
for production, so places with flat land and cheap land costs are favorable.
 World Oil Consumption

World Oil Consumption (millions of barrels per day) - 2009

>10 7-10 4-7 2-4 1-2 <1

Source: U.S. Energy Information Administration
World Crude Oil Refineries

Source: http://bbs.keyhole.com/ubb/ubbthreads.php?ubb=showthreaded&Number=1197575&site_id=1#import
 Oil Refining in North America
Data of production ,consumption ,import and export of petroleum
products in North America - 2009
* Production Consumption Export **Market consume
East Coast (PADD 1) 1,165,583 1,989,293 65,795 2055088
Midwest (PADD 2) 1,368,167 1,599,338 13,685 1613023
Gulf Coast (PADD 3) 2,699,330 1,259,381 468,107 1727488
Rocky Mountain (PADD 4) 222,977 225,463 588 226051
West Coast (PADD 5) 1,071,012 1,015,265 100,337 1115602

*Period-Unit: Annual-Thousand Barrels

**Consumption + Export
Source:
U.S. Energy Information Administration
- Refinery & Blender Net Production
- Product Supplied
- Exports
Oil Refining locations in North America

Source:
U.S. Energy Information
Administration
- State
 Oil Refining locations in North America
- Most of the oil refineries are located in PADD 3 (Gulf Coast) rather th
an PADD 1 (East Coast).
Possible reasons:
1. The Big Inch – There are petroleum pipelines
from Texas (in PADD 3) to New Jersey (i
n PADD 1), which lower the cost of transport.

2. Agglomeration – Oil refineries which located

together can gain from agglomeration.
3. Port – Rather than local market and raw materials
sources, there are also overseas market. Along the
Gulf Coast, there are largest (in trade volume) port
like Port of South Louisiana, Port of Houston, Port of
↑Texas City ,USA Beaumont etc…Furthermore, by sea transport, the
transport cost can be lowered.
Source: http://bbs.keyhole.com/ubb/ubbthreads.php?ubb=showthreaded&Number=1197575&site_id=1#import
http://2.bp.blogspot.com/_E-QOnTGFX_o/R1LLVZ8kh7I/AAAAAAAACWI/eOU6valbvhc/s1600-R/inch.jpg
 Other location factors of Oil Refiners
- Oil Refiners are located near the water source as
large amount of water is required for o
il refining.
- Refinery products and crude coal are distributed b
y sea, rail and road to markets, therefore Oil Refiner
s are located at places where the accessibility is high
.
- Although oil refining is a market-oriented industry Moscow ,Russia↗

, it dose not located at the middle of the city. This is

because of the high land price.

↗ Houston ,USA London, UK→

Source: http://bbs.keyhole.com/ubb/ubbthreads.php?ubb=showthreaded&Number=1197575&site_id=1#import
 Further Examples
- Oil refineries in Australia are located near the bi
g city. (Sydney ,Melbourne)
- In china, most of the oil refineries are located i
n the Eastern part of china, where the consu
mption of refining products is larger then th
e western part.

↓Egypt

←Australia
↑Australia
←China

- Oil refineries are located in the Northern-

east part of Egypt where most cities located
rather than the southern and the western part
where are desert.

Source: http://bbs.keyhole.com/ubb/ubbthreads.php?ubb=showthreaded&Number=1197575&site_id=1#import
 Conclusion
- The locations of oil refineries meet the Weber Model.
- The major locational factor which affect the location of oil
refineries is the market, as oil refining is a market-oriented as it is a
weight gain industry. Oil refiners are therefore located near the
market rather than the raw materials.
- When the first factor fulfilled, the oil refineries will then choose
to located near the water source rather than far away from it.
- Oil refineries will also located at high accessibility places, like
near the ports, highways, rail, etc. Furthermore, oil refineries will
be located at places where the land is extensive flat and cheap.
-Therefore, a city which near a deep coast would be most
preferable as it is near the market, with unlimited water supply and
the accessibility is high.