Where Does Gasoline Come From

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By AAA Automotive
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Gasoline was discovered nearly 160 years ago as a byproduct of refining crude oil to make kerosene for lighting. There was no use for gasoline at the time, so it was burned at the refinery, converted to a gaseous fuel for gas lights, or simply discarded. About 125 years ago, in the early 1890s, automobile inventors began to realize that gasoline had value as a motor fuel. In 1911, gasoline outsold kerosene for the first time. And, by 1920, there were about nine million gasoline-powered vehicles in the United States, and gas stations were opening across the country to fuel the growing number of cars and trucks.1

Figure 1. “Well to wheel” production, refining and distribution of gasoline. (Image: Dean Armstrong, National Renewable Energy laboratory)
Today, gasoline is the fuel of choice for light-duty vehicles, which consume around 90 percent of the product sold in the United States.2 Gasoline is also used in motorcycles, recreational vehicles, boats, small aircraft, construction equipment, power tools and portable electrical generators. Americans use an average of more than one gallon of gasoline per person per day, with U.S. consumption at around 392 million gallons per day as of December 31, 2016.3

So, where does all that gasoline come from, and how does it end up in automobile fuel tanks? Read on to learn more about the manufacture and distribution of gasoline.

Oil Production

Gasoline is made from crude oil, which contains hydrocarbons – organic compounds made up entirely of hydrogen and carbon atoms. Crude oil has historically been obtained through vertical wells drilled into underground and undersea reservoirs. A well is essentially a round hole lined with a metal pipe called a casing. The bottom of the casing has holes in it that allow oil from the reservoir to enter. Many oil wells also produce natural gas, which is primarily used for fixed-site applications like home heating, but may also serve as a motor fuel with appropriate vehicle modifications.

Modern oil wells still begin with vertical shafts, but from there they can branch off in multiple directions and to varying depths. These secondary shafts provide access to additional oil, increasing production while minimizing surface disturbances. Horizontal drilling is a common practice in fracking, a process that uses fluid injection and explosive charges to break up the ground around a well, which frees up additional oil and natural gas. Horizontal wells can extend several miles from the central shaft.

While a few wells have natural internal pressure that drives the oil to the surface, most require some form of submersible or above-ground pump to remove the oil. Several additional processes may be used over the lifespan of a well to extract the maximum amount of oil possible. Common secondary extraction methods include flooding water into the well, and injecting gasses or steam. When crude oil prices fall, low-producing wells may be capped, only to be brought back online when prices rise.

Figure 2. An oil well with an electrically-powered pump. (Image: Famartin, Wikimedia Commons)
Contrary to popular belief, crude oil varies in color from almost clear to jet black, and can have a viscosity that ranges from that of water to nearly solid. The quality of crude oil varies greatly as well, although oils from the same general area tend to have similar properties. Oil quality is based on a chemical analysis where the two most important values are molecular density and sulfur content.

Oils that have short hydrocarbon chains and an American Petroleum Institute (API) specific gravity of 34 or higher are considered “light,” those between 31 and 33 are “medium,” while those 30 and under are “heavy.” Oils with a sulfur content of less than 0.5 percent by weight are “sweet,” and those above that level are “sour.” Light sweet crude oil is the most valuable type because it is more easily refined at a lower cost and produces greater quantities of finished products.

There are 46 key oil exporting countries, but crude oil prices are generally quoted based on one of three main products: West Texas Intermediate Crude, North Sea Brent Crude, and UAE Dubai Crude. The pricing of these products serves as a barometer for the entire petroleum industry. Oil prices are based on the cost for a 42-gallon “barrel” of crude, a unit of measure that dates back to the dawn of petroleum drilling.

In the past, the United States imported major amounts of crude oil and other petroleum products. The peak was in 2005 when net imports (imports minus exports) had risen to 12.6 million barrels per day. More recently, ongoing exploration and advanced extraction processes have increased domestic oil production and reduced oil imports. In 2016, net imports were just 4.9 million barrels per day, which is equivalent to about 25 percent of total U.S. petroleum consumption. This is up slightly from 24 percent in 2015, which was the lowest level since 19704.

Crude Oil Transport

Once crude oil is extracted from wells, it is stored in large tanks before being transported to refineries. Pipelines, ships and barges are common methods used to move crude oil. However, in recent years, increased production in areas that lack pipeline or waterway access have resulted in more oil being transported by train in tank cars. Very thick and heavy forms of crude oil, such as tar sands, must be thinned with solvents before they can be pumped through pipelines or transported by other means.

Figure 3. A section of the Trans-Alaska oil pipeline. (Image: Luca Galuzzi, Wikimedia Commons)
All crude oil transport methods carry potential risks to the environment. However, oil train derailments pose additional hazards because trains routinely travel through cities and towns where oil spills and potential fires could cause significant property damage and loss of life.

To address these concerns, the Department of Transportation released a comprehensive final rule in May 2015 that contained upgraded tank car standards, new operational guidelines for moving large volumes of flammable liquids by rail, and enhanced emergency response planning and training. The railroad industry supports accelerated replacement of older tank cars, has increased track inspections to minimize the possibility of derailments, and adopted special technology to help determine the safest rail routes for oil transport.5

Oil Refining

Refineries are large-scale industrial facilities that produce commercial products from crude oil and, in some cases, other source materials such as biomass. More than half of the oil refining capacity in the United States is located on the Gulf Coast, with the rest dispersed across the country – typically close to sources of oil production or transportation pipelines and waterways.

Oil refineries operate 24 hours a day and seven days a week, but must be shut down periodically for maintenance and repair. Generally, this occurs in the spring and fall when changes must be made at the refineries to switch production from summer to winter gasoline, and vice versa. The differences between the two will be discussed later, and more information can be found in the AAA Newsroom.

Refinery shutdowns impact regional gasoline supplies, so they are usually planned well in advance and carefully monitored. This allows the distribution network to make any necessary adjustments to ensure uninterrupted fuel supplies. Unscheduled refinery outages caused by technical problems or extreme weather can result in short-term localized gasoline shortages and higher fuel prices.

Figure 4. An oil refinery at Anacortes Washington. (Image: Walter Siegmund, Wikimedia Commons)
The Refining Process

Nearly all of the gasoline sold in the United States is refined here, and the U.S. also exports large quantities of gasoline to other countries – over 230 million barrels in 2016.6 Refining crude oil into finished petroleum products is an extremely complex undertaking. The following description provides a high level overview of the refining process, focusing on gasoline production.

All refineries use a primary process called fractional distillation to break crude oil down into various component parts. Distillation involves heating the crude oil until it boils (at around 600° C) and then injecting the vapor into a distillation tower. As the hot vapor rises in the tower it cools, and at different heights and temperatures various “fractions” of the crude oil condense and are collected. Heavier fractions, such as lubricating oil, have higher boiling points and condense near the bottom of the tower. Lighter fractions, such as propane and butane, have lower boiling points and rise to the top. Gasoline, kerosene, gas oil and diesel fuel are collected at the mid-portion of the tower.

Figure 5. A basic schematic of the crude oil refining process. (Image: American Fuel and Petrochemical Manufacturers)
Very few petroleum products, including gasoline, are ready for use when they come off the distillation tower. A number of secondary refining processes are required to purify the fractions and convert them into marketable products.

“Cracking” involves treatment processes that break the molecules of heavier fractions down into lighter ones. It is frequently used to make gasoline components from heavier oils. There are many forms of cracking such as fluid catalytic cracking, hydrocracking and coking/thermal cracking. Each results in unique hydrocarbon chains that are used in gasoline and other products.

“Combining” is essentially the opposite of cracking. It unites lighter fractions into heavier ones that are also used in formulating gasoline. Two common combining processes are reforming and alkylation. The former increases the quantity of components that go into making gasoline, while the latter creates “aromatic” hydrocarbons that play a key role in raising the octane of the finished fuel.

The final step in gasoline production is blending. Multiple petroleum products from the various refining processes are carefully combined to create regular and premium grade base gasolines. These fuels have to meet explicit and extensive performance requirements that change with both the season and the location where the fuel will be sold. For example, summer gasoline is blended to vaporize less easily, which helps reduce evaporative emissions. Winter gasoline is blended to vaporize more easily, which helps with cold engine starting and driveability.

Several areas of the United States require specially blended “boutique” or “reformulated” gasolines that burn cleaner and are part of a State Implementation Plan (SIP) to reduce emissions. Originally, there were 15 unique formulations, but in an effort to reduce the proliferation of gasoline blends, the EPA now allows only six boutique fuels to be used in new SIPs.7 Other formulations that are part of existing SIPs continue to be used in various areas.

Figure 6. Continental U.S. boutique gasolines (2015) – each color other than white represents a unique reformulated gasoline blend. (Image: ExxonMobil)
The amounts of finished petroleum products made from a barrel of crude oil will vary with the refinery, but most plants are designed to maximize gasoline output. As shown in the accompanying illustration, nearly half of every barrel is made into gasoline, with around a quarter becoming diesel fuel (ultra-low sulfur distillate). Due to an effect called “refinery processing gain,” a 42-gallon barrel of crude oil will actually provide about 45 gallons of finished petroleum products.

Figure 7. Average petroleum product output (in gallons) from a barrel of crude oil in 2016. (Image: U.S. Energy Information Administration)
Gasoline Distribution

After it is refined, base gasoline is stored in large tanks until it is distributed via pipelines, ships and barges to distribution terminals located in and around major metropolitan areas. To prevent fuel contamination, the pipelines used for this purpose are different than those used to transport crude oil.

Figure 8. U.S. crude oil and refined product pipeline map. (Image: American Energy Mapping)
Gasoline and other refined petroleum products such as kerosene, diesel and jet fuel, are sent through the pipelines in batches with no physical separation between one product and the next. This results in some co-mingling of the products, and systems are in place to isolate these mixtures from the pure products on either side of the interface. The co-mingled liquid, called transmix, is stored separately and sent to special processing plants that re-refine it into saleable products.

Distribution terminals have huge storage tanks that hold regular and premium grade gasoline, diesel fuel and ethanol. The gasoline storage tanks typically contain base fuels from many different refineries and oil companies – which means all gasoline is the same at this point. The distribution terminal also has numerous smaller storage tanks that contain fuel additive packages that vary from standardized supplier formulations to brand-specific mixtures developed by individual oil companies.

Gasoline is delivered to service stations by tanker trucks that can hold up to 10,000 gallons of fuel. Most tanks on these trucks have multiple compartments so they can carry several different types and grades of fuel. When the tanker truck is filled at the distribution terminal, ethanol (where appropriate) and a specific fuel additive package are blended with the base gasoline as it is pumped into the tank. This is the point where generic base gasoline becomes a branded product with unique characteristics.

Figure 11. A compartmentalized tanker truck capable of delivering five different types of fuel. (Image: Kenworth)
Gasoline Retailing

Tanker trucks deliver gasoline and diesel fuel from the distribution terminal to service stations where it is stored in underground tanks. Most stations have tanks for regular and premium gasoline, a tank for diesel if they sell it, and possibly a tank for pure ethanol as discussed later. The following sections discuss several issues consumers should be aware of when purchasing gasoline.

Figure 12. Costs that are included in the price of a gallon of regular gasoline. (Image: U.S. Energy Information Administration)
The accompanying illustration shows what consumers pay for in a gallon of gasoline, and it compares 2016 to the average over the last 10 years. During this time, crude oil prices have fallen, which has caused the percentages of other costs to rise. Keep in mind that these increases may not reflect actual dollar amount changes because the cost of a gallon of gas has dropped considerably. For example, the federal and state tax portion has gone up 6 percent, even though the federal gasoline tax has not changed since 1993 and only a few states have increased the fuel taxes they levy.

Gasoline Grades

Gasoline is sold in regular and premium grades, and sometimes a mid-grade as well. Mid-grade fuel is created in the pump by blending regular and premium gasoline. The grade of a gasoline is based on its octane, which rates how well the fuel prevents engine “knock.” The higher the octane number, the greater the fuel’s resistance to knocking.

In most parts of the country, regular gasoline is 87 octane, mid-Grade is 89 and premium is 91, 92 or 93, depending on local factors. In areas at high altitudes, where the air contains less oxygen to support combustion, regular, mid-grade and premium gasolines usually have octane ratings of 85, 87 and 91 respectively.

AAA research found no increase in engine performance or decrease in exhaust emissions when using gasoline with an octane rating higher than that recommended by the vehicle manufacturer. Unless the owner’s manual specifies mid-grade or premium fuel for a vehicle, AAA recommends that consumers save their money and stick with regular grade gasoline.

Top TierTM Gasoline

The federal government requires that all gasoline contain a minimum quantity of detergent additives to help prevent harmful carbon deposits on fuel injectors, engine intake valves, and combustion chamber surfaces. However, many automakers believe the minimum required additive content is insufficient to maintain optimum engine and emission control system performance over the long term. In response, they created an enhanced fuel additive standard called Top TierTM detergent gasoline.

Figure 13. A comparison of intake valve deposits with different fuel additive packages. (Image: AAA)
AAA research verified that Top Tier gasoline can keep engine components up to 19 times cleaner than fuels with the minimum required detergent level. Today, 52 brands of gasoline meet the Top Tier standard; a list can be found here. AAA recommends using Top Tier gasoline to remove and prevent engine deposits, maximize vehicle performance and fuel economy, and reduce exhaust emissions.

Ethanol Content

In 2005, Congress enacted the Renewable Fuel Standard, which mandated the adoption of several renewable fuels, but primarily ethanol. In 2007, renewable fuel usage targets were set that required using 36 billion gallons of such fuels annually by 2022. Those targets are now under review because improved vehicle fuel economy and other factors have resulted in fuel sales volumes well below those projected more than a decade ago. In 2016, around 14 billion gallons of ethanol were added to gasoline sold in the United States, almost all of which contains up to 10 percent ethanol (E10).

Ethanol can help reduce America’s dependence on imported oil, and it is also a good octane booster. In fact, most base gasolines today are blended to a lower octane number that is then increased with the addition of ethanol to achieve the octane rating posted on the pump.

Figure 14. A gasoline pump that dispenses ethanol-free regular grade gasoline in addition to regular, mid-grade and premium gasolines containing ethanol. (Image: 127driver, Wikimedia Commons)
On the downside, ethanol is corrosive and attracts water, which can cause problems in fuel systems not designed for E10 gasoline. This primarily affects older cars, boat motors, motorcycles, personal recreational vehicles and small engines used in power equipment. AAA recommends checking the operator’s manual or contacting the vehicle, equipment or engine manufacturer to determine whether gasoline containing ethanol is safe to use in any given application. Ethanol-free gasoline is available at most marinas and a limited number of gas stations.

Some service stations sell E15 and E85 gasoline blends that contain up to 15 and 85 percent ethanol respectively. These stations often have an additional storage tank that holds pure ethanol, which is mixed with gasoline in special “blender pumps” to create the final fuel. Some blender pumps also dispense additional ethanol/gasoline mixtures that range between 15 and 85 percent ethanol content.

E15 is relatively rare in the marketplace at this time, and AAA recommends using it only in vehicles where it is specifically approved by the automaker. Fuels with an ethanol content greater than 15 percent must only be used in “flex-fuel” vehicles that are factory equipped with special fuel systems that can adapt to higher ethanol blends.


The ability of the average person to impact gasoline production, distribution and sales is pretty much limited to the selections they make at the pump. Up until that point, the process is controlled by oil companies and government agencies. That is not to say consumer choice is unimportant. Collectively, consumer buying choices can have a negative impact on corporate earnings and encourage more responsible behavior after environmental disasters such as oil spills. On an individual basis, choosing the appropriate grade and quality of gasoline can save money, optimize performance and fuel economy, and reduce exhaust emissions.

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