Many oil refineries are constructed near major cities, but still require additional logistics to efficiently deliver refined products (i.e. gasoline and diesel) to local service stations.  Some refineries can ship products directly to a gas station through their own on-site Terminal, but many refiners rely on product pipelines to ship finished product to off-site terminals.

Everyone surely has seen tanker trucks transport fuel to a gas station, but many do not realize that most of these tanker trucks fill up at terminals instead of the actual oil refinery.  Terminals are not as hazardous to the community as refineries, so many terminals can be placed in close proximity to population centers. 

Terminals are just a collection of storage tanks and truck offloading facilities, so they can enable convenient resupply of local gas stations.   An oil refinery produces gasoline, jet, and diesel, and ships the products underground through product pipelines to these terminals.   Small tanker trucks can then load products from terminals and distribute fuel to various service stations over several quick round trips.

Product pipelines are particularly interesting because one pipeline can carry many different types of products (gasoline vs diesel) and also many different grades of products (premium gasoline vs regular gasoline).  An observant person may ask “well, how can you ship different types of products and not mix them all up”?  The answer lies in the product shipping order sequence and the pumping rates. 

Let’s take a typical refinery that ships 4 different products on one product pipeline:

1. Heating Oil
2. Ultra Low Sulfur Diesel
3. 87 Octane Gasoline
4. 93 Octane Gasoline

Generally speaking, the most optimal way to ship these product out of the refinery in the following order.

1. 93 Octane Gasoline
2. 87 Octane Gasoline
3. Ultra Low Sulfur Diesel
4. Heating Oil

Since the refinery consumed a great deal of energy to make each finished product, the goal is to minimize product downgrade during shipping.  This is done by sequencing Like products next to one another.

• In the example above, the two gasoline products are shipped next to each other since they are very similar in specs.  It is very easy to blend 93 Octane into 87 Octane product, so pipeline shippers can put the interface layer between these two products into the same tank as the less stringent product - in this case it is 87 Octane Gasoline. 

• The Gasoline batch and Diesel batch are placed next to each other because they have similar amounts of sulfur.  However, Gasoline and Diesel products are very dissimilar, so a terminal cannot easily put this interface into either the gasoline or diesel product tank.  The interface layer between Gasoline and Diesel is often times sent back to the refinery for reprocessing.  This material is commonly referred to as “Transmix”, and requires additional costs to turn back into finished product again.

• Similar to the two gasoline batches, the interface between the Ultra Low Sulfur Diesel and Heating Oil can be combined into the Heating Oil tank since Heating Oil is just a very low quality diesel. 

As you can imagine, the greater the number of different batches that are shipped over the pipeline, the higher amount of interface material is downgraded.  Efficient refiners schedule pipeline batches in as high volumes as possible to reduce the amount of interface material created.

Most refineries have several pipelines that can carry products to different areas.  Depending on how many cities, states, or countries a refinery supplies, there can be multiple pipelines that carry product to various terminals.  An intricate supply chain web can be created as some terminals connect to additional terminals, and so on. 

One interesting note to mention is that while Jet fuel can go through a terminal similar to Gasoline and Diesel, Jet fuel continues down the path of pipelines to reach its end destination.  Many major airports have receiving facilities on site, so jet is pumped directly from a terminal to the airport storage tanks.

The next time you fill up at a station, or see a tanker truck carry fuel around, you now understand that your gasoline or diesel product likely shipped through a terminal before reaching your service station.