The graph above was created based on US Energy Information Administration
(EIA) crude oil, gasoline/diesel, and natural gas price data from January 2001
to December 2014. (Click here, here, and
here to find this data.) Based on this
EIA data and assumptions about the quantities of gasoline and diesel that are
obtained from crude oil and natural gas, gross profit margin percentages (GPM%)
were computed for gasoline/diesel sales from crude oil and gasoline sales from
natural gas.
The resulting monthly GPM% results for both crude oil to
gasoline/diesel and natural gas to gasoline were then used to create the graph. The X-axis is the range of crude oil prices,
per barrel, over the period January 2001 to December 2014 (sorted from lowest
to highest). And the Y-axis is GPM%
values. The blue line shows the monthly
GPM% of selling gasoline and diesel produced from crude oil against monthly Brent
crude oil prices. The red
line shows the monthly GPM% for selling gasoline produced from natural gas against
various crude oil prices.
Based on EIA information, 12 gallons of diesel and 19
gallons of gasoline are obtained (on average in 2013) from 1 barrel of crude
oil. Using this output quantity and EIA
per gallon market prices, a total sales price for the diesel and gasoline
produced from one barrel of Brent crude oil was computed for each month. The cost of material sold is the
Brent monthly market price. From these
values, a monthly gross profit and GPM% were computed and plotted against
monthly Brent crude oil prices per barrel (shown by the blue line on the
graph).
From several sources found on the Internet, an estimated 5
gallons of gasoline can be obtained from each thousand cubic feet of natural
gas. And, from EIA monthly data for the
industrial delivery price of natural gas and the monthly gasoline market
prices, monthly GPM% were computed and plotted against the monthly Brent crude oil
prices per barrel (shown by the red line on the graph).
No other costs were considered in computing the GPM%; other
than the cost of the input material (crude oil and industrially-delivered
natural gas) – costs obtained from the EIA.
Therefore the GPM% is only for sales prices less cost of raw
material.
The graph indicates that as the price per barrel of Brent crude
oil increases, an increasing GPM% divergence clearly shows in favor of the
natural gas to gasoline conversion compared to the crude oil to gasoline/diesel
conversion. This begins to happen in the
$65 to $70/barrel range.
This divergence is consistent with what seems to be an
increased commercial interest in recent years with gas to liquid conversion
processes.
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