Reply #27: How Gas is Sold Wholesale

[jmowreader]

I run Acme Oil Company. I own a refinery.

I sell three kinds of gas. The first is Acme Gas. My petroleum engineer formulated an additive package I put in Acme Gas that makes it unique. This gas I sell at Acme stations.

I then sell custom-formulated gas. Sunny Day Oil Company doesn't own a refinery, but they have their own petroleum engineer who develops additive packages to make Sunny Day Gas unique. I put Sunny Day's additive package in some of the gas I make and ship it to Sunny Day stations.

And then there's feedstock. This is gas with no additive package. It's pretty much useless the way it sits. I ship this to two classes of customers: bulk plants buy it and mix it with various convenience store chains' additive packages, and other refiners buy it to supplement their own output. Because if White Horse Oil Company can refine 5 million gallons of gas per day, but they sell 5.5 million gallons to consumers, they must get half a million gallons of gas from somewhere. That "somewhere" is someone else's refinery.

If Acme Oil Company can sell feedstock, ExxonMobil can sell feedstock. If Acme can make custom blends of fuel for refinery-free oil companies, so can ExxonMobil.

The big trend in the convenience store industry is unbranding--buying gasoline or blendstock on the open market. If this "don't buy ExxonMobil gas" thing really took hold, watch for lots of ExxonMobil stations to unbrand. This doesn't mean you won't have ExxonMobil fuel in your tank, but you won't know it's there if it is.

IOW, this is all a game of semantics.