ABOUT PETROLEUM INDUSTRY

   
Michigan consumes about 458 thousand barrels (19 million gallons) of petroleum products each day, over two thirds in the form of motor fuels used in over 7 million motor vehicles traveling an average of over 260 million miles per day in 2015.

Most gasoline is made from crude oil, formed from the remains of plants and animals that lived hundreds of millions of years ago. These remains were covered with layers of sediment over time and with extreme pressure and high temperatures over millions of years, these remains became the mix of liquid hydrocarbons (an organic chemical compound of hydrogen and carbon) that we call crude oil. Refineries break down these hydrocarbons into different products. These “refined products” include gasoline, diesel fuel, heating oil, jet fuel, liquefied petroleum gases, residual fuel oil and many other products. 

 

The most basic refining process separates crude oil into its various components. Crude oil is heated and put into a distillation column where different hydrocarbon components are boiled off and recovered as they condense at different temperatures.  A 42 gallon barrel of crude oil provides about 45 gallons of petroleum products through gains in processing.  In general, refineries aim to maximize the amount of gasoline produced. To accomplish this, a number of processes have been created to convert other kinds of hydrocarbons into gasoline. For example, the cracking process takes the long carbon chains of heavy gas oil and breaks them into shorter-chain hydrocarbons using a combination of heat, pressure and catalysts.

The characteristics of the gasoline produced depend on the type of crude oil that is used and the setup of the refinery where it is produced. Gasoline characteristics are also affected by other ingredients that may be blended into it, such as ethanol. Most of the fuel ethanol added to gasoline is made from corn grown in the United States. The gasoline performance must meet industry standards and environmental regulations that vary by location.


EIA: Net Imports and Domestic Petroleum as Shares of US Demand

EIA: Sources of US Net Petroleum Imports, 2010

 

The United States imported about 25% of the petroleum, which includes crude oil and refined petroleum products that were consumed during 2016. About 60% of these imports came from Canada. Our dependence on foreign petroleum has declined since peaking in 2005.  The U.S. was the third largest crude oil producer in 2015 at 9.4 million barrels per day.

The trend of a decreased reliance on imports is the result of a variety of factors including a decline in consumption and shifts in supply patterns. The economic downturn after the financial crisis of 2008, improvements in efficiency, changes in consumer behavior and patterns of economic growth have all contributed to the decline in petroleum consumption. At the same time, an increased use of domestic biofuels (ethanol and biodiesel), and strong gains in domestic production of crude oil and natural gas plant liquids have expanded domestic supplies and reduced the need for imports.

In Michigan

Michigan oil production peaked in 1979 at 35 million barrels per year.  Since then, Michigan’s oil production, from small wells scattered across the Lower Peninsula, has declined significantly to only 5.6 million barrels per year in 2016, or an average of roughly 471,000 barrels per month. 
 

Description: Michigan Field Production of Crude Oil (Thousand Barrels)

Michigan has a single 132,000-barrel-per-day (bpd) refinery in Detroit which is capable of processing Canadian heavy sour crude oils into refined products such a gasoline, distillates, asphalt, and propane.

Biofuels

Michigan has substantial ethanol production capacity with five operating ethanol plants and a combined capacity of 287 million gallons per year. This number has remained relatively steady despite the effects of the recession and volatility in the commodity markets. Plans for the construction of new plants in 2008, however, were abandoned due in part to difficulties with financing. While ethanol blending is not mandated in Michigan, it is widely used as an oxygenate substitute for Methyl Tertiary Butyl Ether (MTBE) in unleaded gasoline. Until recently, the EPA limited ethanol blending in gasoline to 10 percent, but the limit was raised to 15 percent in January, 2011. Higher level blends such as E85 are also available with 245 stations currently dispensing the fuel.

In contrast, the state has gone through a transition with biodiesel plants and currently has three operational. This compares to four operating plants in 2007. The past several years have been a challenge for the biodiesel industry due to the high price of soybeans and the need to diversify into lower cost feedstocks. Annual production capacity is approximately 10 million gallons per year.

 

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