SIC 4613 Petroleum Pipelines, Refined

 
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SIC 4613

This category covers establishments primarily engaged in the pipeline transportation of refined petroleum products of petroleum, such as gasoline and fuel oil. Linking all petroleum pipeline industries together is Industry Group 461: Pipelines, Except Natural Gas, which includes the other major subcategories of the petroleum pipeline industry, SIC 4612: Crude Petroleum Pipelines and SIC 4619: Pipelines, Not Elsewhere Classified.

NAICS CODE(S)

486910

Pipeline Transportation of Refined Petroleum Products

INDUSTRY SNAPSHOT

Pipelines are the leading method of transporting refined petroleum, and they are an especially important mode of transportation in the United States where large volumes of oil must be moved over land. Manufacture of refined petroleum is classified in SIC 2911: Petroleum Refining, fuels classified as refined petroleum products include gasoline, kerosene, distillate fuel oils, residual fuel oils, and lubricants—essentially any product made from the distillation of crude oil or redistillation of unfinished petroleum derivative.

The United States has an extensive network of pipelines for the transport of refined petroleum predominantly owned and managed by the large, vertically integrated operations of the major oil companies. In the mid-2000s, firms in the industry operated a network moving petroleum and petroleum products approximately 200,000 miles of pipeline that moved over 12.9 billion barrels annually. Petroleum products accounted for about 41 percent (5.3 billion barrels) while crude oil accounted for 59 percent (7.6 billion barrels). The entire national infrastructure was valued at an estimated $31 billion.

The pipeline network contains gathering systems of pipelines, which are used to bring crude petroleum from the oil fields and pump it to storage. Then, oil fields have a network of small-diameter "gathering lines" collecting crude oil from individual wells and transporting the output to a large-diameter "trunk line" for shipment to a refinery. Next, pipelines move refined products to markets.

The ups and downs of the industry have been attributed to several economic forces. The growth of pipelines in general is linked to, and ultimately limited by, oil production. Thus, industries such as petroleum pipelines in general, and refined products pipelines in particular, are subject to competition from other transport industries such as water carriers, motor carriers, and railroads. As a method of transportation, in the mid-2000s pipelines transported about 62 percent of refined petroleum, compared to water carriers, which transported about 28 percent. Railroads and trucks transported the remaining percentage of petroleum products.

ORGANIZATION AND STRUCTURE

About 20 companies controlled the operation of refined petroleum pipelines in mid-2000s, with the eight largest organizations dominating 80 percent of the market. Because of the heavy involvement of the large oil interests, it is difficult to differentiate the pipeline components of their operations from the other components.

The petroleum industry consists of four distinct, but connected, vertical levels. These are production, refining, marketing, and transportation. The refined products segment manufactures finished products ranging from petroleum coke to motor gasoline to fuel oil, heating oil, and jet fuel. Connecting the mines to the refinery and the refinery to the market are specialized transportation networks including pipelines, trucks, railroads, and, most notably, water carriers (tankers and barges).

Pipelines have historically been the most cost-effective means of transportation of petroleum products. According to the Association of Oil Pipe Lines, pipelines transport about 17 percent of the nation's freight but only consume 2 percent of total U.S. freight expenditures. Having the advantage of economies of scale, pipelines have construction costs that are proportional to pipeline radius, but pipeline capacity is roughly proportional to the square of the radius. Thus, for example, if pipeline radius is doubled, pipeline capacity will increase by a factor of about four.

While the share of railroads and truck methods has remained virtually unchanged, pipelines' share rose to around 60 percent through 1977, declined to 45.5 percent in 1983, and bounced back to a 54 percent share in the 1990s. Water carriers surpassed pipelines for a short period in the early 1980s but have largely played second fiddle to pipeline market share as their share of the market declined from 50 percent in 1985 to about 40 percent in 1995 before falling to about 28 percent by the mid-2000s. Aside from their economies of scale, pipelines are viewed as a safer and more environmentally sound method of transporting petroleum with the exception of two accidents in the 1990s. Historically, spills from pipelines have been dwarfed by...

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