What is an 'Oil Refinery'

An oil refinery is an industrial plant that refines crude oil into petroleum products such as diesel, gasoline and heating oils. Oil refineries essentially serve as the second stage in the production process following the actual extraction of crude oil by rigs. The first step in the refining process is distillation, where crude oil is heated at extreme temperatures to separate the different hydrocarbons.

BREAKING DOWN 'Oil Refinery'

Oil refineries serve an important role in the production of transportation and other fuels. The crude oil components, once separated, can be sold to different industries for a broad range of purposes. Lubricants can be sold to industrial plants immediately after distillation, but other products require more refining before reaching the final user. Major refineries have the capacity to process hundreds of thousand barrels of crude oil daily.

In the industry, the refining process is commonly called the "downstream" sector, while raw crude oil production is known as the "upstream" sector. The term downstream is associated with the concept that oil is sent down the product value chain to an oil refinery to be processed into fuel. The downstream stage also includes the actual sale of petroleum products to other businesses, governments or private individuals.

According to the U.S. Energy Information Administration (EIA), on average, U.S. refineries produce, from a 42-gallon barrel of crude oil, about 20 gallons of motor gasoline, 12 gallons of distillate fuel, most of which is sold as diesel fuel, and 4 gallons of jet fuel. More than a dozen other petroleum products are also produced in refineries. Petroleum refineries produce liquids the petrochemical industry uses to make a variety of chemicals and plastics.

Pertroleum products made from a barrel of crude oil

An oil refinery runs 24 hours a day, 365 days a year and requires a large number of employees. Refineries come offline, or stop working, for a few weeks each year to undergo seasonal maintenance and other repair work. The EIA regularly publishes lists of planned refinery outages in the United States. A refinery can occupy as much land as several hundred football fields.

Oil Refinery Safety

Oil refineries can be dangerous places to work at times. For example, in 2005 there was an accident at BP's Texas City oil refinery. According to the U.S. Chemical Safety Board, a series of explosions occurred during the restarting of a hydrocarbon isomerization unit. Fifteen workers were killed and 180 others were injured. The explosions occurred when a distillation tower flooded with hydrocarbons and was over-pressurized, causing a geyser-like release from the vent stack.

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