DEFINITION of 'Nelson Index'
The Nelson Index is a measure of the complexity of an oil refinery. Refineries that are higher on the Nelson Index are valued higher relative to their peers. For example, high Nelson Index refineries may be able to refine lower quality crude oil, or be capable of producing higher value end products. Due to their greater complexity, high Nelson Index refineries are more costly to build and operate.
BREAKING DOWN 'Nelson Index'
The Nelson Index was developed in 1960 by Wilbur Nelson. Since the details of how a refinery operates are difficult to comprehend without specialized industry knowledge, the Nelson Index provides an easy metric for quantifying and ranking the complexity of different refineries. Based on the Nelson Index, on average, U.S. refineries are the most complex in the world. However, there are an increasing number of highly complex refineries located in other countries.