From Wellhead to Car: The Odyssey of Oil

Have you ever wondered how oil gets from the wellhead to a gas station pump? Discover the process in this high-level, step-by-step overview. For purposes of this exposition, let’s presume that the pertinent wellhead is found on land and that the whole journey occurs within the United States.

Oil Supply Chain

The industry is often segmented into three parts, using a riparian metaphor: upstream, midstream, and downstream. Upstream includes exploration, well design and construction, and production of oil. Midstream involves the transportation, storage, and wholesale marketing of the oil. Finally, downstream refers to refineries and the final delivery of oil for retail, such as with this example, at a gas station.

So how does the process begin?  Let’s start with the well design. Designs are distinct from one site to the next due to factors such as geology and the site’s operation. The goals in any case, though, are the same: to safely and successfully drill a well at minimum costs. Wells should be designed to prevent contamination of the oil and protect groundwater resources.

As drilling is underway, a first string of casing is cemented into place. Casing is a series of large diameter piping that is built to withstand geological pressures and corrosive chemistry, preventing the collapse of the borehole. With the casing in place, the wellhead is welded on top. Concisely, the wellhead provides pressure sealing, monitoring, and tubing suspension.

Afterwards, another piece of hardware, the Christmas tree, will be added for purposes of pressure containment. The tree can also be employed to inject water or gas into a non-producing well to enhance performance. This occurs to take the oil through the vertical leg of its journey, from the bowels of the earth to the surface. 

Our next step, the midstream process, is shorter. The oil is taken from the point of production, by train, truck, ship, or pipeline, to a place of short-term storage. It is at this early stage, from this site, that some of the oil is diverted to a strategic petroleum reserve. 

Floating Downstream

From short term storage, the oil will eventually travel to the refinery, the main transformation point at which the crude oil becomes (for our purposes) gasoline. Of course, much of it is not meant for a gas station. Only about half of a barrel of crude oil extracted from the ground becomes gasoline. Another 40% will become either diesel fuel, heating oil, jet fuel, or kerosene. The final tenth is residual fuel oil. The term residual fuel-oil refers to the heavier, lower-priced oil that fuels oil-faring ships, electrical plants, and factories.

Once refined, and whether by truck, train, or pipe, the products may proceed to a terminal, where they may be supplemented with ethanol or additives to await transit to the final point of sale. Some of the newly refined oil can bypass the terminal. Oil used in power plants doesn’t need additives, so it can travel to the plants directly from the refinery.

But the oil derivative with which we are concerned needs to be treated to become the gasoline that will be transferred to a local service station. Then, at the end of a long chain of planning, transacting, and processing, an automobile’s driver is able to make use of this historically convenient form of energy to get to work or home, to shop, or just to exercise his freedom of movement.  

As a final thought, the distinctions among upstream, midstream, and downstream processes are helpful for understanding the big picture, but one must also understand that there is a good deal of overlap. In the end, it doesn’t really matter how one labels the links, but it is valuable to understand how they all work together from wellhead to pump.