The type of crude affects the price


    Crude oils have various attributes that make them more or less attractive to refiners. West Texas Intermediate (WTI), the U.S. marker crude traded at Cushing Oklahoma, for example, is quite different than Western Canadian Select (WCS) produced and traded in Alberta.

    Crude oil that is less viscous and flows more easily, is referred to as “light,” while more viscous crudes that may require heating or diluent to flow are considered “heavy.”

    In general, light crudes require less processing at a refinery to produce a more valuable mix of finished products such as gasoline, diesel, and jet fuel. Without more intensive processing (and associated investment in complex refining capacity) heavier crudes tend to produce proportionally higher quantities of less valuable products such as residual fuel oil and asphalt. Similarly, certain impurities in crudes make them much more difficult to process effectively into refined products that meet current standards.

    Sulfur is a common impurity in crude oil that must be removed from most transportation fuels to meet ever more stringent air quality requirements. Crudes with a low level of sulfur are designated “sweet,” while those with a high level are called “sour.” Because of the need for much more complex processing, heavy, sour crude oil typically sells at a lower price than light, sweet crude.

    The economics of a refinery depend upon the mix of crudes processed (crude slate), the complexity of the refinery processing units, and the desired output mix of finished products such as gasoline, diesel, jet fuel, home heating oil, residual fuel, and asphalt (product slate). While a refinery can handle some variance in its crude slate, the combination of refining units installed limits the degree to which the properties of the slates can change and still efficiently be converted into a particular mix of finished products. For example, numerous U.S. refineries have invested in complex refinery units to process slates consisting primarily of heavy, sour crudes efficiently into gasoline, diesel jet fuel and other high valued products.

    Adding light, sweet crudes to the input slates for such refineries increases their crude oil input costs, but does not necessarily provide a significant enough improvement in valuable product yields to be profitable.

    Source: American Petroleum Institute