wealth of references at the end of every chapter as well as comprehen- sive review questions.

There are a plethora of volumes with similarly awe inspiring titles available in our book shops, but those that allow the reader to explore a logical progression of subject matter and to an adequate depth are not easily located. TelecomnaLlnicutiolls

Systems Engineering is one such title, and one that would be welcome on the book shelves of student, engineer, manager, marketeer, or policymaker alike.

R. P. Askham Cuble & Wireless Worldwide Services

London, UK

Oil demand, refining and prices

DEMAND, PRICES AND THE REFINING INDUSTRY: A Case-Study of the European Oil Products Market

In the chapter on Refinery Yield, Capacity and Output, refineries were classified into four types.

3. Semi-complex refineries. The next step in complexity is to add thermal cracking to the simple refinery. This process converts residue, principally into gas oil, and for the first tranche of residue conversion it is considerably cheaper than either catalytic cracking or hydrocracking. There are many varieties of this process but none of them is very selective. Therefore, although gas oil is the main product, gas, naptha and kerosine are also pro- duced. For most purposes the pro- ducts are of poor quality and need to be treated. Thermally-cracked kero- sine, for instance, cannot be used as aviation fuel.

Robert Bacon, Margaret Chadwick, Joyce Dargay, David Long and Robert Mabro

Clarendon Press, Oxford, 1990, L29.50

This study was undertaken by the Re- search Staff of the Oxford Institute of Energy Studies. It is mainly concerned with the period 1976 to 1986 although some of the statistics studied are over the period 1960 to 1987. Econometrics and statistics are used to study oil demand, the refining industry and oil prices. There are no simple major conclusions from the work nor are there really any to be expected from such studies. An exception was that demand for automotive diesel fuel was insensitive to price. For other oil pro- ducts, the conclusion was that price elasticities varied considerably from one European country to another and it was considered unwise to use them for time periods beyond 1988.

1. Topping refinery. The process unit common to almost all refineries is the crude distallation or topping unit, which splits the crude oil into a num- ber of fractions by distillation at atmospheric (or near atmospheric) pressure. There were 34 topping re- fineries in operation at end 1976 and 14 at end 1986. 2. A simple (or hydroskimming) refin- ery has crude distillation, catalytic re- forming and hydrotreating. It may

also have hydrodesulphurization for gas oil and kerosine. The simple con-

4. Complex refineries. The definition of a complex refinery is one that has catalytic cracking or hydrocracking. Both of these processes commonly use a vacuum gas oil as feedstock and therefore a high-vacuum distillation unit is normally also required. The conversion achieved in both these pro- cesses is much higher than in thermal cracking.

The crude being processed by the re- fineries was also significantly lighter in 1986 than in 1976.

To a very large part, the reduction

Table 1. Reduction in West European refinery capacity, 1976 to 1986 (000 bbliday).

1976

1986

Topping and simple Semi-complex Complex Total 13 901 1 192 5 434 20 527

4 249 1 746 8 SO2 14 498

Table 2. Average crude oil gravities by region, 1976 and 1986.

Analyses of refining and pricing

Some sections of the book contain analyses which will have appeal to those who are directly concerned with oil refining and oil pricing.

Region Total world production WOCANA production OPEC production European imports Europe - total use

_ refinery intake North America - total use

_ refinery intake Japan/Australia - total use

_ refinery intake

Degrees API 1976 1986 35.5 37.2 34.1 36.5 34.4 37.0 34.8 37.2 34.7 36.9 34.2 36.6 na 40.0 na 35.8 na 37.x na 36.4

UTILITIES POLICY January 1991 189

Rook review

figuration is more widely used than the topping, because it enables the refinery to make motor gasoline and greatly assists in the treating of sour crude components. There were 68 simple refineries in operation in 1976 and 14 in 1986.

Book reviews/Puhlicutions received

Table 3. Gross product worths from different refinery types.

May 198GJanuary 1987 Arabian Light Ninian Weighted 1976 1986 average ($/tonne) ($/tonne) ($/tonne)

Topping 191 197 195 Simple 196 204 201 Semi-complex 213 225 222 Complex 215 225 222 (Mean crude value cif) 204 211 209

Table 4. Rotterdam oil product price differentials (monthly statistics 1976-87).

Differentials (Differences) Gasoline/naphtha Gasoline/kerosine Gasoline/gas oil Gasoline/fuel oil Kerosinelnaphtha Kerosinelgas oil Kerosine/fuel oil Naphtha/gas oil Naphtha/fuel oil Gas oil/fuel oil

US$/tonne Mean Standard Maximum Minimum

deviation 27.2 14.2 72.0 4.3 13.1 20.7 58.8 -52.4 39.8 21.7 103.4 -27.3

125.9 54.3 251.4 45.7 14.1 20.1 X6.2 -23.6 26.6 14.3 71.4 2.9

112.8 54.4 246.6 45.0 12.6 19.3 48.7 -62.1 98.7 46.8 218.9 -25.3 86.1 44.8 217.7 34.7

Table 5. Rotterdam Oil Product Price Ratios (monthly statistics 1976-87).

Ratios Mean

Gasoline/naphtha 1.13 Gasoline/kerosine 1.07 Gasoline/gas oil 1.21 Gasoline/fuel oil 2.05 Kerosineinaphtha 1.06 Kerosine/gas oil 1.12 Kerosine/fuel oil 1.91 Naphtha/gas oil 1.07 Naphtha/fuel oil 1.81 Gas oil/fuel oil 1.70

Standard deviation 0.08 0.10 0.12 0.40 0.11 0.04 0.35 0.10 0.30 0.31

Maximum Minimum

1.46 1.03 1.32 0.75 1.50 0.85 3.61 1.24 1.72 0.83 1.25 1.01 3.06 1.36 1.36 0.66 2.74 1.20 2.78 1.22

in refinery capacity and the produc- tion of a much higher proportion of distillate products was due to the de- cline in residual fuel oil demand by European utilities.

Throughout the period, there was considerable economic incentive to operate a complex refinery.

The buyer of refined oil products for a utility or any other enterprise is always interested in the relative prices of oil products. David Long has a complete chapter on relative product prices.

To assess the relative prices, one can examine price differences (but these are sensitive to the crude oil price) or price ratios, which are not.

Of Tables 4 and 5, the one showing the price ratios will be most useful to utility fuel buyers. For example, when the ratio of the price of gas oil to residual fuel oil is 1.22, gas oil is very cheap.

Since the book was written, Euro- pean refining has become quite profit- able and the Middle East crisis of August 1990 has changed the max- imum and minimum values for some of the oil price ratios. Nevertheless, the value of the book remains for those who have an econometric and statistical interest in oil demand, refin- ing and prices.

Gilbert Jenkins

Berkshire, UK

Publications received Adam Smith and Modern Economics From Market Behaviour to Public Choice by Edwin G. West (Edward Elgar Publishing Group, Gower House, Croft Road, Alder- shot, Hampshire, Gull 3HR, UK, 1990, 224 pp. f35.00)

Ariadne’s Thread - The Search for New Modes of Thinking by Mary E. Clark (MacMillan Distribution Ltd, Houndmills, Basingstoke, Han&, RG212XS, UK, 1989,

584 PP)

Alternative Fuels for the Transportation In- dustry by Michelle Heath (CERI, 3512-33 St, NW, Calgary, Alberta, Canada, T2L 2A6, 1990)

Austrian Economics, Volume I: History and Methodology, Volume II: Money and Capital, Volume III: Market Process ed by Stephen Littlechild (Edward Elgar Pub- lishing Group, Gower House, Croft Road, Aldershot, Hampshire, Gull 3HR, UK, 1990, three vol set, 1 472 pp, f220.00)

Capital Projects - New Strategies for Plan- ning, Management, and Finance ed by John Matzer, Jr (International City Manage- ment Association, 777 North Capitol Street, NE, Washington DC 20002, USA, 1990, 228 pp)

Co-Generation and Electricity Production in British Industry 1488 by I.R. Schaffer

(Energy Efficiency Series No 12, Energy Efficiency Office, HMSO Books, London, UK, 1990, 44 pp, f8.95)

Communication Satellites Their Develop- ment and Impact Heather E. Hudson (Maxwell Macmillian International, Pur- nell Distribution Centre Paulton, Bristol BS18 5LQ, UK, 1990, 224 pp, f15.95)

Competing Against Time: How Time-Based Competition Is Reshaping Global Markets George Stalk, Jr and Thomas M. Hout (Maxwell MacMillan International, Purnell Distribution Centrc, Paulton, Bristol BS18 5LQ, UK, 1990, 288 pp, f16.95)

Competitive Procurement of Electric Utility Resources (EPRI Report, EPRI CU-6898, EPRI Research Reports Centre, PO Box 50490, Palo Alto, CA 94303, USA, 1990, 180 pp, $295.00)

190 UTILITIES POLICY January 1991