Processing, transporting and selling refined products made from crude oil is the business of the downstream segment of the oil and gas industry.
Key downstream business sectors include:
- Oil Refining
- Supply and Trading
- Product Marketing and Retail
The downstream industry provides thousands of products to end-user customers around the globe.
Many products are familiar such as gasoline, diesel, jet fuel, heating oil and asphalt for roads. Others are not as familiar such as lubricants, synthetic rubber, plastics, fertilizers and pesticides.
Business Characteristics of the downstream oil and gas segment
The downstream segment, as shown in the Business Characteristics diagram, is a margin business. Margin is defined as the difference between the price realized for the products produced from the crude oil and the cost of the crude delivered to the refinery.
Although the price of crude sets the absolute level of product prices, it may or may not affect refining or marketing margins. Downstream margins tend to be reduced, or squeezed, when crude price increases often cannot be recovered in the marketplace. On the other hand, margins tend to hold, or even increase, when crude prices drop and the marketplace more slowly adjusts to these lower crude prices.
Register now for full access to this Oil 101 content.
Oil 101 – A FREE Introduction to Oil and Gas
Not a Member Yet? Learn More about Oil 101 here
Already a Member? Login for Access.