STATE OF ILLINOIS HEXRY HORNER. Governor DEPARTMENT OF REGISTRATION AND EDUCATION JOHN J. HALLIHAN, Director DIVISION OF THE STATE GEOLOGICAL SURVEY M. M. LEIGHTON, Chief URBAN A REPORT OF INVESTIGATIONS — NO. 54 THE MARKET FOR ILLINOIS OIL IN 1937 AND 1938 BY Walter H. Voskuil PRINTED BY AUTHORITY OF THE STATE OF ILLINOIS URBANA, ILLINOIS 1939 LIBRARY ENVIRONMENTAL PROTECTION AGENCY STATE OF ILLINOIS SPRINGFIELD, ILLINOIS STATE OF ILLINOIS Hon. Henry Horner, Governor DEPARTMENT OF REGISTRATION AND EDUCATION Hon. John J. Hallihan, Director BOARD OF NATURAL RESOURCES AND CONSERVATION Hon. John J. Hallihan Edson S. Bastin, Ph.D., Geology William A. Noyes, Ph.D., LL.D., Chem.D., D.Sc, Chemistry Louis R. Howson, C.E., Engineering William Trelease, D.Sc, LL.D., Biology Chairman Henry C. Cowles, Ph.D., D.Sc, Forestry Arthur Cutts Willard, D.Engr., LL.D., President of the University of Illinois STATE GEOLOGICAL SURVEY DIVISION Urban a M. M. Leighton, Ph.D., Chief Enid Townley, M.S., Assistant to the Chief Jane Titcomb, M.A., Geological Assistant GEOLOGICAL RESOURCES Coal G. H. Cady, Ph.D., Senior Geologist L. C. McCabe, Ph.D. James M. Schopf, Ph.D. Earle F. Taylor, M.S. Charles C. Boley, M.S. Non-Fuels J. E. Lamar, B.S. H. B. Willman, Ph.D. Robert M. Grogan, M.S. Oil and Gas A. H. Bell, Ph.D. Chalmer L. Cooper, M.S. G. V. Cohee, Ph.D. Frederick Squires, B.S. Charles W. Carter, Ph.D. James L. Carlton, B.S. Areal and Engineering Geology George E. Ekblaw, Ph.D. Richard F. Fisher, B.A. Subsurface Geology L. E. Workman, M.S. J. Norman Payne, Ph.D. Elwood Atherton, Ph.D. Merlyn B. Buhle, M.S. Gordon Prescott, B.S. Stratigraphy and Paleontology J. Marvin Weller, Ph.D. Petrography Ralph E. Grim, Ph.D. Richards A. Rowland, Ph.D. Physics R. J. PlERSOL, Ph.D. M. C. Watson, Ph.D. Donald O. Holland, M.S. GEOCHEMISTRY Frank H. Reed, Ph.D., Chief Chemist W. F. Bradley, Ph.D. G. C. Finger, Ph.D. Velma E. Nichols, M.S. Fuels G. R. Yohe, Ph.D. Carl Harman, B.S. Non-Fuels J. S. Machin, Ph.D. James F. Vanecek, M.S. Analytical O. W. Rees, Ph.D. George W. Land, B.Ed. P. W. Henline, B.S. Mathew Kalinowski, B.S. Lee Whyte, B.S. MINERAL ECONOMICS W. H. Voskuil, Ph.D., Mineral Economist Grace N. Oliver, A.B. EDUCATIONAL EXTENSION Don L. Carroll, B.S. PUBLICATIONS AND RECORDS George E. Ekblaw, Ph.D. Chalmer L. Cooper, M.S. Dorothy Rose, B.S. (on leave) Alma R. Sweeney, A.B. M. Frances Harper, M.S. Meredith M. Calkins Consultants: Ceramics, Culi.en Warner Parmelee, M.S., D.Sc, University of Illinois; Pleistocene Invertebrate Paleontology, Frank Collins Baker, B.S., University of Illinois. Topographic Mapping in Cooperation with the United States Geological Survey. This Report is a Contribution of the Section of Mineral Economics. 78224— 3M— 3-39) April 15, 1939 CONTENTS PAGE Illinois in the national oil picture 6 Producing fields 6 Refining districts 6 Relation of refining districts to producing districts 8 Central Refining District and its relation to the Illinois oil industry 10 Relation of refineries to source of crude petroleum 10 Description by refining districts 11 Refined products 13 Market for oil products 15 Water transportation of oil products 18 Oil shipments on the Upper Mississippi Waterway 19 Summary of water-borne commerce in oil products 19 Competitive position of Illinois oil 20 Pipe line connections 21 New refineries 24 Gasoline recovery 24 Disposal of residual stocks 25 Geographic distribution of residual oil market 26 Commercial and domestic heating 27 Market for residual oils 27 Geographic distribution of residual oil consumption in Illinois 28 Summary of the Illinois market 30 Illinois oil production and refining capacity 30 Possible changes in crude oil supply 33 Oklahoma and the Central Refining District 34 Kansas and the Central Refining District 35 ILLUSTRATIONS FIGURE 1. Daily capacity of U. S. crude oil refineries, by districts, Jan. 1, 1938 7 2. Refineries in the Central Refining District, Jan. 1, 1939 12 3. Ratio of Illinois production of crude oil to runs-to-stills in the Central Refining District, 1937-38 20 4. Oil production in the Central Refining District and in Illinois, 1937-38 21 5. Consumption of industrial fuel oils in Illinois (including crude oils and gas oils and gas oils used as fuel) by market areas, 1929 29 6. Location of principal Illinois oil fields and their pipe line connections 31 [3] TABLES PAGE 1. Petroleum in Illinois and the United States, 1936-38 5 2. Petroleum production in the United States, by principal districts, 1937-38. ... 6 3. Refining districts, location and capacity, as of Jan. 1, 1938 7 4. Movement of crude oil from mid-Continent to refining districts, 1937 9 5. Crude oil shipped from principal oil-producing states to Central Refining Dis- trict refineries, 1937 9 6. Capacities of refineries, by states, Jan. 1, 1938 10 7. Refineries by market groups in the Central Refining District 11 8. Crude runs-to-stills in the Central Refining District, 1932-38 13 9. Sources of crude petroleum in states comprising the Central Refining District, 1937 14 10. Output of refined products in the Central Refining District, 1936-38 14 11. Production and consumption of three major oil products, 1936-37 15 12. Consumption of major oil products in the Central Refining District market territory, 1936-37 16 13. Consumption of fuel oil, by uses, in the Central Refining District market territory, 1936-37 17 14. Lakewise shipments of principal oil products from Lake ports, 1936 18 15. Lakewise receipts of principal oil products at Great Lakes ports, 1936 19 16. Movement of principal oil products on the Mississippi river from Minneapolis, Minnesota to mouth of Missouri river, 1936 19 17. Shipments of principal oil products on the Illinois Waterway, 1936 20 18. Ratio of Illinois production to runs -to- stills in the Central Refining District, 1937-38 22 19. Crude oil capacity in United States plants, Jan. 1, 1938 25 20. Production of residual oils in the Central Refining District, 1937-38 26 21. Sales of heating oil, by states, 1934-37, and approximate per capita consump- tion in 1937 27 22. Consumption of fuel oils (including crude oils and gas oils used as fuel), 1929. . 28 23. Production of petroleum in Illinois, 1907-16 33 24. Petroleum production and change, in mid-Continent fields and Illinois, 1933-38. 34 25. Production and consumption of Oklahoma crude petroleum, by specified areas, 1936-37 34 26. Production and consumption of Kansas crude petroleum, by specified districts, 1936-37 ' 36 [4] THE ILLINOIS OIL MARKET AREA IN 1937 and 1938 By Walter H. Voskuil The rapid rise in the production of petroleum in Illinois since the opening of the discovery well in the deep portion of the Illinois basin at Clay City by the Pure Oil Company on February 2, 1937, has brought with it the problem of the profitable disposal of this crude petroleum and the refined products obtained therefrom. The rise in production since 1936, the last year in which production was derived solely from the old fields, is as follows: Table 1. — Petroleum Production in Illinois and the United States, 1936-38. a (Thousands of barrels) Year Production Per cent, Illinois United States Illinois, of total 1936 1937 1938 4,475 7,426 23,929 1,099,687 1,277,653 1,212,530 0.41 0.58 1.97 a U. S. Department of the Interior, Bureau of Mines, Monthly Petro- leum Statements. In terms of percentage increase of the national total, the gain in Illinois output is not a large figure. Nevertheless, the quantity of petroleum added to the national supply has seriously affected previously existing market connections and made necessary curtailed operations in mid-Continent fields to the extent that their customary output was displaced by oil produced in Illinois. The districts particularly affected were those located in Oklahoma and Kansas, and to a lesser degree the oil-producing districts in Texas and in some eastern fields. The more important factors contributing to the displacement of mid- Continent oil by oil produced from the Illinois basin are: The low cost of producing Illinois oil The nearness of large oil consuming markets The absence of proration in Illinois Under these conditions, it is possible to expand Illinois production to a con- siderable degree and, under conditions of free competition, to dispose of a large [5] 6 THE ILLINOIS OIL MARKET AREA quantity of oil in a market near which the Illinois oil fields are favorably located. In this paper an attempt will be made to measure the extent of the market for crude oil and for refined products within which Illinois oil can find an outlet. ILLINOIS IN THE NATIONAL OIL PICTURE A clearer perspective of the position of Illinois in the oil market can be obtained by presenting, in brief summary form, a pattern of the oil producing and oil consuming districts of the United States. PRODUCING FIELDS The principal oil producing fields in the United States and their contribution to the total oil supply in 1937 and 1938 are shown in table 2. Table 2. — Petroleum Production in the United States, by Principal Fields, 1937-38. (Thousands of barrels) Field 1937* Per cent 1938' 1 Per cent Mid Continent 774,717 238,521 176,743 26,576 34,014 28,512 77 60.5 18.7 13.9 2.0 2.7 2.2 677,253 249,749 181,478 25,323 53,228 26,155 68 55.8 California 20.5 Gulf Coast 15.0 Rockv Mountain 2.1 Central West (111., Ind., Ky., Mich., Ohio) Eastern fields 4.4 2.2 Other Total 1,279,160 100.0 1,213,254 100 U. S. Bureau Mines, Minerals Yearbook, p. 823, 1938. U. S. Bureau Mines, Monthly Petroleum Statement No. L80. REFINING DISTRICTS The primary consumer of crude petroleum is the refinery, and therefore the location and capacity of refineries determines the direction and quantity of crude oil flow from the producing fields. For statistical purposes, the Bureau of Mines has divided the nation into 10 refining districts. Some of these are located primarily in oil producing districts and others are located mainly or solely in oil consuming areas. The daily refining capacity by districts is shown in table 3. Figure 1 shows a map of the United States with principal refining districts outlined. [7] THE ILLINOIS OIL MARKET AREA RELATION OF REFINING DISTRICTS TO PRODUCING DISTRICTS Since Texas, Oklahoma, Louisiana, Kansas, and New Mexico supply 90 per cent of the crude oil produced east of California, it is evident that there is a large interstate movement of petroleum. The movement from these states to refining districts for the year 1937 is shown in table 4. Table 3. — Refining Districts, Location, and Capacity as of Jan. 1, 1938. a (Barrels per day) District Crude Oil Capacity Operating Shut down Building Total East Coast Appalachian Ind., 111., Ky., etc. .. . Mid-Continent: Okla., Kans., Mo., etc Texas inland Ark., La., inland Gulf Coast: Texas Louisiana Rocky Mountain California Total 595,900 136,450 512,110 390,580 264,680 99,500 906,500 143,500 102,366 818,610 19,800 18,850 50,570 76,870 103,055 11,500 9,500 12,260 78,550 35,000 48,400 7,500 1,000 11,000 94 , 200 5,000 4,000 76,920 615,700 155,300 570,380 467,450 367,735 117,000 916,000 148,500 118,476 897,160 3,970,196 380,955 283,020 4,634,171 a Petroleum Refineries, including cracking plants, in the United States, Jan. 1, 1938, U. S. Bureau Mines, Inf. Cir. 7034, p. 4, 1938. It will be noted from an examination of this table that the two principal crude oil movements from the mid-Continent and Gulf Coast to outside refining districts are to the East Coast Refining Districts and to the Central Refining District. A smaller quantity moves to the Appalachian refining District and negligible quantities move into the Rocky Mountain Refining District. A further examination of the table shows that the largest portion of Texas oil moving to refining districts outside of the mid-Continent and gulf coast refining districts is shipped to the East Coast and only a small proportion moves into the Illinois- Indiana-Kentucky-etc. Refining District. 1 On the other hand, Oklahoma, Kansas, and New Mexico ship a considerable portion of their output to refineries in the Central Refining District. Minor quantities are also received from Texas. The quantities and percentages shipped from these states in 1937 into this district are shown in table 5. Hereafter referred to as the Central Refining District. THE NATIONAL OIL PICTURE Table 4. — Movement of Crude Oil from mid-Continent to Refining Districts, 1937. a (Thousands of barrels) To East Coast: From Texas Oklahoma Louisiana \. Mexico 126,674 12,543 19,043 9,072 To Texas Gulf: From Texas Oklahoma Louisiana N. Mexico To Louisiana Gulf: From Texas Oklahoma .208,544 . 17,201 . 40,497 . 14,953 To Appalachian: From Texas 167,302 160 281,195 Oklahoma 13,034 26,727 . 26,314 434 Louisiana N. Mexico To Arkansas and Louisiana Inland: From Texas Louisiana To Rocky Mountains: From Texas N. Mexico . 19,451 1,714 To Illinois-Indiana- Kentucky, etc: 39,921 12,474 47,913 85 , 795 Kansas N. Mexico 26,727 10,260 . . 11,143 . . 5,370 135,256 71,893 1,073 To Texas Inland: From Texas 16,513 Louisiana 670 500 N Mexico 2,184 1,478 75,825 1,978 a U. S. Bureau Mines, Minerals Yearbook, p. 847, 1938. Table 5. — Crude Oil Shipped from Principal Oil Producing States to Central Refining District Refineries, 1937, a Texas Oklahoma. . Kansas New Mexico. Quantity shipped (Thousands of barrels) 12,474 85,795 26,727 10,260 Per cent of State output 2.4 37.5 37.8 26.4 U. S. Bureau Mines, Minerals Yearbook, p. 193S. Since petroleum from Illinois fields is processed mainly in the refineries of the Central Refining District, the principal competition comes from the Oklahoma-Kansas-New Mexico oil fields. These sources of oil received in the Central Refining District, the disposal of the products, and the market for refined products in the consuming district tributary to this refining district will therefore be analyzed in detail. 10 THE ILLINOIS OIL MARKET AREA CENTRAL REFINING DISTRICT AND ITS RELATION TO THE ILLINOIS OIL INDUSTRY The Central Refining District 2 includes refineries in Illinois, Indiana, Kentucky, Michigan, and western Ohio. The distribution of refineries in opera- tion Jan. 1, 1939 is shown in figure 2. The capacity of refineries in operation on Jan. 1, 1938, is shown in table 6. Table 6. — Capacities of Refineries by Stairs, Jan. 1, 1938." (Barrels per day) State Capacity Cracking Illinois 142 , 800 228,000 28,600 68,350 93 , 900 46.310 Indiana 1 ' Kentucky Michigan Western Ohio. . . . 75 , 500 8,150 10,050 37.200 n U. S. Bureau Mines, Petroleum Refineries, including cracking plants, in the United States, Inf. (Mr. 7034, Jan- uary 1, 1938. h Practically all located in the Chicago district. The above includes plants that are shut down. The first column represents the maximum daily average crude throughput of the plant in complete operation on straight distillation, with due allowance for time closed down. The capacity of cracking plants is given as the maximum daily production of cracked gasoline. Of more significance for a study of the market than a tabulation of refinery capacities by states is the geographical location of the refineries with respect to their accessibility to supplies of crude oil. For this purpose, the tabulation of capacities, as given in table 7, is assembled to group refineries according to group location. RELATION OF REFINERIES TO SOURCE OF CRUDE PETROLEUM The refineries located within the Central Refining District vary in capacity from small plants of 2,000 to 3,000 barrels daily capacity to large refineries with capacities ranging from 10,000 to 40,000 barrels and one plant with 100,000 barrels capacity. Some of the small refineries depend entirely upon local supplies of crude oil whereas the large refineries have pipe line connections with producing fields in the mid-Continent area. Practically all of the larger refineries are equipped with cracking plants for increasing the recovery of gasoline from crude oil. These types of refineries also manufacture lubricants, waxes, and special products in addition to the several 2 Designated by the Bureau of Mines as the "Illinois-Indiana-Kentucky-etc." Refininp District. CENTRAL REFINING DISTRICT 11 oil fuels. The smaller refineries confine their operations to the recovery of gaso- line by straight run distillation together with the recovery of kerosene, gas oil and distillate fuel, and residual fuel oils. Description by refinery districts. — The largest aggregate and individual refinery capacities are located in the Chicago industrial area which includes Lockport and Joliet. Refineries in Indiana are all located in the Chicago district with the exception of a small skimming plant of 200 barrels daily capacity at Troy. Refineries in the Chicago district have four pipe line connections with producing fields in Texas, Oklahoma, and Kansas. Since the development of the Illinois basin fields, pipe line connections have been established there. Table 7. — Refineries by Market Groups in the Cen- tral Refining District. 4 (Barrels per day) Group Capacity Cracking Capacity Chicago district (111. and Ind.) . . Southeastern Illinois. . . . Western Illinois (E. St. Louis-Wood River. . . . Kentucky Michigan Ohio, Lake Erie ports. . . Ohio, interior 266,500 26,000 66,910 28,600 68,350 64,500 1 1 . 900 57,810 7,200 27,610 8,150 10,050 28,700 2,700 Ohio, Cincinnati 18,000 8,000 a Petroleum refineries, including cracking plants, in the United States, Jan. 1, 1938: U. S. Bureau Mines, Inf. Cir. 7034, 1938. Refineries in the southeastern Illinois field have a daily capacity of 26,000 barrels and a cracking capacity of 7,200 barrels daily. The refinery at Lawrence- ville, with a capacity of 16,000 barrels, is connected with the mid-Continent field through the Illinois Pipe Line Company and with the Illinois basin fields through the Central States pipe line. The refinery in Robinson has depended mainly on local crude oil supplies but is connected with the mid-Continent through the Texas-Empire pipe line. Refineries in the Wood River crossing and East St. Louis district are served b\ three pipe lines from the mid-Continent with connections in Kansas, Okla- homa, and Texas. Pipe line connections have also been established between the Illinois fields at Centralia and Salem via the Illinois Pipe Line Company to the refinery at East St. Louis via the Wood River connection. Refineries in Kentucky are all small in size, the largest being at Latonia (near Cincinnati), Ohio, with a daily capacity of 8,000 barrels. This refinery is served by a branch line of the Illinois Pipe Line Company with connections THE ILLINOIS OIL MARKET AREA in the mid-Continent field. The remaining refineries probably serve a local market and do not extend their activities into the Illinois basin area. The Michigan refineries are mainly small plants, the largest refineries having a daily capacity of 8,000 barrels with an average daily capacity of less than 3,000 barrels. Michigan petroleum, in addition to a market outlet in the refineries in the field, is also carried by pipe line to Detroit, Toledo, Port Huron, and Canadian refineries. ~"\ / X • / ( { 1 • •>' \/ V \ • • 1 V — i % tf f J ( / • i • I i 1 • \ t \ 1 1 • • • . t „j~- — O 25 50 • • SCALE IOO \ > 200 MILES Above map not subject to copyright. Illinois State Geological Survey. Figure 2. — Refineries in the Central Refining District, Jan. 1, 1939. CENTRAL REFINING DISTRICT 13 In western Ohio, the largest refining capacity is located in the Toledo district. These refineries have pipe line connections with the mid-Continent, the Michigan fields, and the Illinois basin. The refineries in west-central Ohio, located at Lima and Findlay, have a capacity of 11,900 barrels. Pipe line connections with Illinois basin fields and the mid-Continent provide the source of crude petroleum. The refinery at Hooven (near Cincinnati), Ohio, has a capacity of 18,000 barrels daily. This refinery receives its supply of crude by the Gulf Refining Company pipe line from the mid-Continent territory. The Central Refining District possesses approximately 14 per cent of crude oil run to refineries in the United States. The quantity run to stills from 1932 to 1937 and the percentage of the United States total is shown in table 8. Table 8. — Crude Runs-to-Stills in the Central Refining District, 1932-38. a (Thousands of barrels) Central Year Refining District United States Per cent 1932 106,758 819,997 13.0 1933 117,073 861,254 13.6 1934 119,166 895,636 13.3 1935 129,958 906,243 13.4 1936 147,724 1,068,570 13.9 1937 164,243 1,183,440 13.9 1938 159,446 1,165,015 14.1 ;1 Data from Minerals Yearbooks, U. S. Bureau Mines. In table 9 is shown the production of crude petroleum in each state in the Central Refining district in 1937, the receipts from other states, the total crude runs-to-stills, and the delivery of oil to other states. With the exception of small quantities of oil from Wyoming to Indiana, and of West Virginia to Ohio, "Receipts from other states" are supplied by Kansas, Louisiana, New Mexico, Oklahoma, and Texas. Receipts from principal states in the mid-Continent area are shown in table 9. It should also be noted that in 1937 approximately one-sixth of Illinois oil moved to refineries in Ohio and Kentucky. REFINED PRODUCTS The principal fuel products obtained from crude petroleum are gasoline, kerosene, gas oil and distillate fuel, and residual fuel oil. Output of these products in the Central Refining District in 1936, 1937, and 1938 is shown in table 10. 14 the illinois oil market area Table 9. — Sources of Crude Petroleum in States Comprising the Central Refining District, 1937. a (Thousands of barrels) State Production Receipts from other states Runs-to- stills Delivery to other states States to which oil is delivered Illinois Indiana 7,426 826 5,510 15,928 3,559 40,470 70,677 2,303 4,877 36,772 45,626 70,585 7,474 12,931 38,663 1,293 1,044 365 8.553 675 Kv. and Ohio 111. and Ky. Kentucky-Tennessee.. . Michigan Ohio Illinois Ohio and Canada Penn. and W. Va. Total 33 , 249 155,099 175,279 1 1 , 930 a U. S. Bureau Mines, Minerals Yearbook, p. 848, 1938. Gasoline is used mainly as a motor fuel. The kerosene fraction finds an outlet in domestic cooking and as a fuel for space heaters. The market classi- fication of range oil is sometimes included in the kerosene group. Gas oil and distillate fuel is the main source of supply of oils used in commercial and domestic heating. This market is also the principal outlet for this product. About two thirds of the oil sold for domestic heating is obtained from this fraction and the remainder is obtained from the lighter portions of the residual fuel oil. Con- sumption of fuel oil for Diesel engines in this market area is not yet large. The amount reported in 1936 was 719,000 barrels and in 1937, 1,616,000 barrels. Residual oils find their main outlets as fuel for industrial purposes, railroads, and water transportation. Table 10. Output of Refined Products in the Central Refining District, 1936-38.* (Thousands of barrels) 1936 1937 1938 Input: Crude runs-to-stills Natural gasoline 147,724 3,766 164,243 4,077 159,446 4,488 Total input Output: 151,490 85,812 5,724 16,174 20,441 168,320 95,409 6,238 17,033 24,650 163,931 95,511 Kerosene 7,096 Gas, oil and distillate fuel 17,397 Residual fuel oil 23,319 Total refined oil fuels 128,151 84.6 143,330 85.2 143,323 Per cent of crude oil and natural gaso- line 87.4 11 U. S. Bureau Mines, Minerals Yearbook, 1938, p. 860. CENTRAL REFINING DISTRICT The percentage of output of these products may he varied somewhat in the refining process to adapt itself to market demands. In recent years the refinery output of gas oil and distillate fuel has heen increased somewhat to meet the rising demand for heating oils. MARKET FOR OIL PRODUCTS The market area in which the refineries of the Central Refining District distrihute their products cannot he precisely outlined. There is no doubt a con- siderable movement of refined oil products from one refining district into terri- tories normally supplied by other refining districts. For purposes of analysis of market demand and oil product supply, the market territory is here delimited to include the states of Illinois, Indiana, Ohio, Michigan, Kentucky. Wisconsin, Minnesota, Iowa, North Dakota, and South Dakota. Consumption of oil products in the above defined market territory as compared with the production of these products is shown in table 11. Table 11. — Production and Consumption of Three Major Oil Products, 1936-37. (Thousands of barrels) Production in the Central Refining District Consumption in Illinois market territory 1936* Gasoline 85.812 16.174 20,441 138,469 Gas oil and distillate fuels. . Residual fuel oils 20,853 32,738 Total 128,151 192,060 1937^ Gasoline 95,409 17,033 24,650 150,692 Gas oil and distillate fuels. . Residual fuel oils 24,379 34.167 Total 137,092 209,238 ■ U. S. Bureau Mines, Mineral Market Report Xo. 625, Jan. 27, 1938. b U. S. Bureau Mines, Mineral Market Report Xo. 708, Feb. 16, 1939. Within the consuming market area, thus outlined, there is no doubt a substantial shipment of refined oil products from the East Coast and Appalachian refining districts westward into Ohio, Kentucky, and Michigan and from the mid-Continent Refining District northward by pipe line, river barge, and tank 16 THE ILLINOIS OIL MARKET AREA car into the market territory of the Central Refining District. The Great Lakes Pipe Line Company connects nine large refineries in northern Oklahoma to terminals located at Kansas City, Omaha, Des Moines, Minneapolis and Chicago. Table 12. — Consumption of Major Oil Products in the Central Refining District Market Territory, 1936-37. (Thousands of barrels) State Gasoline Gas oil and distillate fuel Residual fuel oil Total 1936 a Illinois Indiana Ohio Michigan Kentucky Wisconsin 28,379 13.367 27.807 23 , 709 5,437 12,012 11,449 10,957 2,652 2,700 8,158 1,359 1,169 2,655 226 2,452 3,014 1,205 231 384 10,193 6,091 6,004 6,345 573 1,570 1,079 668 63 152 46,730 20,817 34,980 32,709 6,236 16,034 Minnesota Iowa 15,542 12,830 N. Dakota S. Dakota 2,946 3 . 236 Total 138,469 20,853 32,738 192,060 1937 b Illinois 30,794 14,587 30,251 26,443 5,996 12,883 12,134 11,997 2,399 2,708 9,873 1,375 1 , 230 3.249 223 2,972 3 , 545 1,307 256 346 10,295 6,358 6,647 6,422 594 1,592 1,281 697 81 200 50,962 Indiana Ohio 22,320 38,128 Michigan 36,114 Kentucky 6,813 Wisconsin 17,447 16,960 Iowa 14,001 N. Dakota S. Dakota 2,736 3.254 Total 150,192 24,376 34,167 208,735 a U. S. Bureau Mines, Minerals Yearbook, 1!).!8, ]>. 876, and idem., Mineral Market Report, M.M.S. No. 625, Jan. 27, 1938. ■> IT. S. Bureau Mines, Mineral Market Report, No. M.M.S. 708, Feb. 16, 1939. Refining companies participating in the line include Continental Oil Com- pany, Barnsdall Oil Corporation, Mid-Continent Petroleum Corporation, Skelly Oil Company, Pure Oil Company, Phillips Petroleum Company, Sinclair Refin- ing Company, Texas Company, and Cities Service Company. 3 3 Oil and Gas Journal, Vol. 37, No. 19, p. 127, Sept. 22, 1938. U F c/i en D 3 c — 04 O U • ^r bT *-' "o "> > g 3 S -: rt £ © 3 OB c 3 ~* o .H I— I 3 bfl ' C C c *-" 3 5£ s ~ g.5 g rt £ en C3 4_i O « ~ "3 * 2 iflO\0>- T+l OM^O^O^ONfNlOlOlO vO io i-h cn t-h cn i-i t^ '- | OfOO^(Ncor^'o Oi^rorOfN "^" VO *-H ^ ^h ^H VO tH CN co 00 O CN CS IO CO o lOr^^co-^r^ONr^covO io 0«l>(NCSHt»)0't'- iO i-l lO'tO'.fNCSrHTttNNrO r~~ oo ,-i t-i co effort IO '~ l CN ONf^OM^^fN'O'tr^'O CO OMNiHH'OfO^'H IO *^cncnoOi-iiO'* | i-i -*M CN co co Tf ^ t— co vO CO o CNCCinOOtNCNCMM • cn co 00 t-h Tt 00 CO r— On • ' i— I i— 1 ^' o NMOioOOaOnrt cn ON CN CN CN i— iMOOOfC'- iO On Ol CN CN (N>HCN »- CN rHNCtOO OO CN v© CO t^- i— I CN o oo -tf o OOO'^'rHOOON'-HfO'-HO C lO'tON'trHMN t^ OC ^ co r^ rt C <*- o 4_j c 5 a ~ Nt^a oo o vOOOO^OvvOON'-'fOiO O - o O t~- O0 On Tji ^t cn o o CN vO tH POXN^aNFOOOOO CN t^OOv. CNOOOvvOiOvOfO <0 t^» CO NH i-H i-H 1< CN COOONt^i-HVOCNlO •^H t^ On O On CN io 00 On ON CN vO -^ CN IO ^. ^. - o ^CN^ VO *H CN On co vO fCjHrt r-0'— ivO'rfCN IO ^ • o CO co -^ iO OO CO t^ ro o X OCNCococoiOOnOOOO co ON-^COCNi-Ht^-ONOOCO'- o io HM CN CN CN t- LT) CN Ol^Mt^fCj ; ,_, o O'+i^rtro 00 CO CO CN ^H t^ fONHOiooaoHTj co iO 00 t— TjH co r^ vO \r r- r^ vO i—i rt O ItH O ■tJ c >. c t 2 « "c c C .5 c chiga ntuck scons nneso va U c h c c % ** % z y CA o 3 *J z o H (/> 20 z 3 a. u 1- p z O 12 O 3 Q O i 8 O z _l 4 _) Li. o 9 n 5 J FMAMJJASONDJFMAMJJASON °- 1937 ' 1938 Ftcure 3. — Ratio of Illinois production of crude oil to runs-to-stills in the Central Refining District, 1937-38. COMPETITIVE POSITION OF ILLINOIS OIL Prior to the discovery of the Illinois basin fields the production of the old southeastern field was processed mainly in the Ohio Oil Company refinery at Robinson, Illinois. The discovery of oil in the basin, and the rapid develop- ment of production brought about a critical condition with respect to market POSITION OF ILLINOIS OIL 21 outlets. There were, during the early stages of development, no pipe line connections with large refining centers near Chicago, western Illinois, or the refineries in Ohio. Although pipe line and market connections were gradually established, the rate of growth was so rapid that difficulties arose in an orderly market outlet development. The rate of growth of oil output in Illinois and its relation to runs-to-stills, in the Central Refining District, in 1937 and 1938, is shown in figures 3 and 4 and table 18. Illinois' portion of crude oil refined in the Central Refining District rose from 2.8 per cent in January 1937 to 28.3 per cent in December 1938. This oil could be absorbed only by the displacement of crude from Oklahoma, Kansas, and Texas, or the construction of additional refinery capacity in an attempt to compete in the refined oil market. RUNS TO S FILLS ILL JNOIS PRO DUCTIC N ; 1 J FMAMJJASON DJFMAMJ JASON 1937 I 1938 Figure 4.— Oil production in the Central Refining District and in Illinois, 1937-38. PIPE LINE CONNECTIONS At present there are more than 1,600 miles of crude oil pipe lines in Illinois operated by 15 pipe line companies. These are: Gulf Companies Pipe Line Illinois Pipe Line Company Clay City Pipe Line Company 22 THE ILLINOIS OIL MARKET AREA Wabash Pipe Line Company Shell Pipe Line Company Sinclair Refining Company Stanolind Pipe Line Company Texas-Empire Pipe Line Company Central States Pipe Line Company Magnolia Petroleum Company Tidewater Pipe Line Company Manley Pipe Line Company Western Pipe Line Company Oklahoma Pipe Line Company Owensboro Pipe Line Company Table 18. — Ratio of Illinois Production to Runs-to- stills in Central Refining District, 1937-38. a (Thousands of barrels) Month Runs to stills Illinois production Per cent 1037 January February March. . . April May June July August. . . September October. . November December. 13.192 11.753 13,211 13,167 14,041 13,684 14.644 14.131 13,825 14,925 14,080 13,590 2.79 2.92 3.10 2.93 2.96 3.3S 3.68 4.77 6.31 6.11 7.03 7.98 1938 January. . February. March. . . April May June July August. . . September October. . November December. 13,567 12,358 12,921 12,624 13,229 12,914 13,955 13,810 14,095 15,225 14,369 14,073 1,128 1,108 1,330 1,388 1,440 1,361 1,642 2,062 2,553 2.768 3,067 3.981 8.31 8.96 10.3 10.9 10.9 10.5 11.8 14.9 18.1 18.1 21.3 28.3 ■ LI. S. Bureau Mines, Monthly Petroleum Statements, Jan. -Dec., 1937 and 1938. POSITION OF ILLINOIS OIL 23 Seven of these are interstate pipe lines connecting mid-Continent fields with refineries at Wood River, in the Chicago district, in eastern Illinois and in Ohio. Pipe line facilities for the new oil fields in Illinois have been provided partly by connections to existing pipe lines and partly by independent lines to serve newly erected or existing refineries. The Manley Pipe Line Company's line connects the Lake Centralia-Salem field with a refinery in Centralia and also with loading stations on the Missouri and Illinois Railroad. The Wabash Pipe Line Company connects Noble, Clay City and Cisne fields with the Illinois Pipe Line at Martinsville, and also with the Texas- Empire in northeast Jasper County. Loading stations are also provided on the B. & O. Railroad. These pipe line connections give the fields access to markets in Ohio and the Chicago district. The Oklahoma Pipe Line Company has a gathering system in the Beecher City-Louden field connecting with Illinois Pipe Line at the Brownstown station in Fayette County. The Western Pipe Line Company has a gathering system in the Beecher City-Louden field connecting with the Illinois Pipe Line at Brownstown Station, and another gathering system in Lake Centralia-Salem field leading to a loading station on the Old Southern Railway. The Illinois Pipe Line Company has been delivering oil to the Texas-Empire line which is shipping the oil for the Globe Refining Company. The Magnolia Petroleum Company has a short pipe line from the Centralia- Salem field to the Illinois Pipe Line Company station at Sandoval. Petroleum is carried westward in the latter line to the Wood River station where it enters the Magnolia line running south to the refinery at East St. Louis. The Lake Centralia-Salem field is also provided with pipe line service to the refinery at Lawrenceville by the Central States Pipe Line Company. A branch line extends to producing fields in Wayne County. The Illinois Pipe Line Company is providing additional facilities for handling Illinois oil by laying 198 miles of loops to the main line through Illnois, Indiana and Ohio. This will add an additional 25,000 barrels daily capacity to the company's lines. Owensboro Pipe Line Company has a 6-inch pipe line from Centralia to Sandoval. The Clay City Pipe Line Company has gathering lines in Clay City, Noble, Beecher City-Louden and St. James fields. This company also has a line from the Dix through Centralia to the Illinois Pipe Line Company at Sandoval, with a branch line extending to Lake Centralia field. In addition to the oil carried from the new fields by pipe line, there are considerable quantities shipped by tank cars on the Missouri-Illinois Railroad Company, the Illinois Central, and the C. B. & Q. 24 THE ILLINOIS OIL MARKET AREA NEW REFINERIES In an effort to find a market for the increased supplies of oil made available by the production in the basin, four refineries have been erected — three in Cen- tralia and one at St. Elmo, in the Beecher City-Louden field. Authentic data on the capacity of these refineries has not been released although they are reported to be of relatively small capacity — ranging from 2,000 to 3,500 barrels daily and are of the type classified as skimming plants. These refineries have the advantage of low cost crude oil in nearby fields and a low transportation cost from field to refinery. Difficulties, however, are likely to be encountered in the disposal of refined products. The problems which these refineries encounter may be grouped under the following headings: Percentage of gasoline recovery The quality of gasoline The disposal of residual stocks GASOLINE RECOVERY In the refining process gasoline is recovered from crude oil by straight run distillation of the crude, and a further cracking of part of the residual stock in cases where refineries are equipped to crack oil. The percentages recovered by the two methods in the Central Refining District for the years 1935 to 1937 are as follows:" 1935 1936 1937 Straight run 23.8 23.8 24.0 Cracked 32.4 31.7 31.6 Total 56.2 55.5 55.6 Average of U. S. for straight run and cracked 44.2 44.1 43.9 The cracking process since 1918 has almost doubled the yield of gasoline from crude oil, as shown by a comparison of that year with 1937. 1918 1937 Straight run 22.7 21.2 Cracked 2.6 22.7 Total 25.3 43.9 On a basis of straight-run production alone, a gasoline consumption of 517,000,000 barrels in 1937 would have required 2,440,000,000 barrels of crude oil instead of the actual runs-to-stills of 1,183,440,000 barrels. The cracking process not only amply provided for the rapidly increasing demand for gasoline, 1 r. S. Bureau Mines, Minerals Yearbook, p. 869, 1938. RESIDUAL STOCKS 25 but also converted a large quantity of low value residual oils into higher value motor fuels. Moreover, the cracking process takes from the market a large quantity of residual oils which would otherwise need to find a market as industrial fuel. Except under conditions of an unusually favorable local gasoline market, the refinery which is equipped for straight run distillation only — that is, the skimming plant — operates at a disadvantage in competing with the complete refinery. A smaller portion of the crude processed in the skimming plant is con- verted into gasoline and more, in proportion, must be sold as fuel oil at prices competitive with coal. This is reflected in the higher percentage of shut-downs among skimming plants as compared with complete plants. For example, on Jan. 1, 1938, operating data on skimming plants and complete refineries for the nation were as shown in table 19. Table 19. — Crude Oil Capacity in United States Plants, Jan. 1, 1938. (Barrels per day) 1 Per cent Operating Shutdown Building Total of total shutdown Skimming plants Complete refineries Intermediate types fall kinds). 1.338,962 1.819,930 761,300 269.185 81.170 30,600 93.120 160.700 29 . 200 1,751.271 15.6 2.061.800 3.9 821.100 3.7 Total 2.970,196 389,955 283.020 4,634,171 8.4 U. S. Bureau Mines, Inf. Cir. 7034, 1938. DISPOSAL OF RESIDUAL STOCKS The principal refined products here grouped under residual stocks are kerosene, gas oil and distillate fuel, and heavy residual fuel oils. These products are, to a considerable degree, by-products of the gasoline manufacturing industry. The quantities produced by refineries depend, within limits, to the amount of gasoline output. These products must be sold in the general fuel market in competition with coal. In some markets, as for example, the domestic heating market, oil may command a slightly higher price per B.t.u. than coal because of advantages of convenience, but in the general industrial market, the price does not vary greatly from comparable coal prices. Since these by-product fuels constitute 30 per cent of the total crude run to stills, sale of these oils is an important supplementary source of income for the refinery. It is important there- fore, in locating a refinery that the market outlet for residual products be given a careful survey, as well as the market for gasoline itself. 26 THE ILLINOIS OIL MARKET AREA The market outlet for a particular refinery depends, among other factors, upon the extent in the preparation of refined products, distance from principal consuming markets, and competition with coal. Residual oils are transported by tank car and not by pipe lines, hence transportation costs per ton-mile are higher than either crude oil or gasoline carried by pipe line. Consumption of major portions of their products is within a relatively short radius of refinery location and the market outlets for residual products are most favorable for those refineries which are located near industrial fuel using centers. Where water transportation is available, such as is the case for oil refineries located on the Great Lakes, the Atlantic Seaboard, or the Interior Waterway system, the market radius is enlarged. Fuel oils, moreover, do not enjoy the specialized and exclusive market held by gasoline. Many of the fuel markets now supplied by fuel oil can also, if necessary, be supplied by coal. Prices of fuel oil therefore are regulated, to some extent, by cost of coal. Production of by-product fuel oils in the Central Refining District in 1937 and 1938 is shown in table 20. Table 20. Production of Residual Oils in the Central Refin- ing District, 1937-38. a (Thousands of barrels) 1937 1938 Quantity Per cent of total Quantity Per cent of total Input: Crude runs to stills 167,243 6,238 17,033 24,650 159,446 7,096 17,397 23,319 Output: Kerosene Gas oil, etc Residual fuel oils. 3.8 10.3 15.0 4.4 10.9 14.6 " U. S. Bureau Mines, Minerals yearbook, pp. 856-7, 1938, and Monthly Petroleum Statements, .Ian. -Dec., 19,'58. Kerosene finds its principal use in cook stoves, space heaters, and to a limited extent, for illumination. Gas oil and distillate fuel is used mainly for domestic and commercial heating. Residual oils find their principal outlet in manufacturing, and oil company use. A detailed statement of the use of these two refined products in the Illinois oil market area is shown in table 13. GEOGRAPHIC DISTRIBUTION OF RESIDUAL OIL MARKET Gas oil and distillate fuel. — Gas oil and distillate fuel is used mainly for commercial and domestic heating, although not altogether so. Smaller quantities are used in gas making, as a fuel for internal combustion engines, as a solvent RESIDUAL STOCKS 27 for asphalts, and other uses. The chief factor affecting demand for gas oil and distillate fuel as a whole and supply for a given purpose is the proportion of the total available supply that has properties fitting it for specific uses. COMMERCIAL AND DOMESTIC HEATING Use of distillate fuel for commercial and domestic heating has grown rapidly in the last 10 years. Consumption for domestic heating by states, is shown in tahle 21. Table 21. — Sales of Heating Oil, 1934-37 and Approximate per Capita Consump- tion in 1937, by States. 81 State Heating oil consumption (Thousands of barrels) Population (1930) (Thousands) Consumption per capita (Barrels) 1937 1934 1935 1936 1937 Illinois 7,348 971 656 1,769 161 1,776 2,002 651 170 182 8,324 1,103 752 2,384 193 2,227 2,497 856 227 283 11,505 1,487 994 3 , 223 224 3,117 3,439 1,207 243 316 13,329 1,655 1,087 3,820 265 3,607 4,186 1,467 270 380 7,631 3 , 239 6,647 4,842 2,615 2,939 2,564 2,471 681 693 1.74 Indiana 0.51 Ohio 0.16 Michigan 0.79 Kentucky 0.10 Wisconsin 1.23 Minnesota 1.63 Iowa 0.59 N. Dakota 0.39 S. Dakota 0.55 Total 15,868 18,846 25,755 30,066 34,322 ■ U. S. Bureau Mines, M.M.S. 625, Jan. 27, 1938. Consumption, per person, is an approximate indicator of the extent to which oil heating is used in each state. In the market area under consideration, Illinois, Minnesota, and Wisconsin are the leading users. Consumers in Illinois are near the large refineries in the Chicago district and costs of transportation from the source of production are low. Minnesota and Wisconson lie in a high cost fuel area and heating oils are in a favorable competitive position with coal. The remaining states have either abundant supplies of coal or are within short distances of coal producing districts. MARKET FOR RESIDUAL OILS The principal use for residual oils in Illinois is as a fuel in manufacturing and for oil company use. Distribution by uses is shown in table 22. Unlike the heating oils, consumption of heavy oils in manufacturing, oil refining and other uses has not increased significantly in the past decade. It appears that competitive balance between coal and industrial fuel oil has been established. 28 THE ILLINOIS OIL MARKET AREA GEOGRAPHIC DISTRIBUTION OF RESIDUAL OIL CONSUMPTION IN ILLINOIS The geographic distribution of industrial fuel oil consumption in Illinois in 1929 is disclosed in a report of the Census in which consumption of oil in manu- facturing, mining and public utilities is given by counties. For purposes of analysis, the consumption of industrial fuel oil in manu- facturing, mining, and public utilities has been grouped into districts shown in table 22 and figure 5 and the consumption in each district is shown. Table 22. — Consumption of Fuel Oils (Including Crude Oils and Gas Oils Used as Fuel), 1929. a District Manu- facturing Mining Public utilities Total Per cent in (Gallons) (Gallons) ( Barrels) each district Illinois 468,362,543 725,071 1,232,448 470,320,062 11,195,716 100.0 Chicago 219,416,514 149,538,642 16,732,353 28,797,304 2,807,293 51,070.437 219,972 12,085 600 409^496 82,918 1 1 ! 844 304,710 915.894 219,636,486 149,550,727 16,723,953 28,809,148 3.521,499 52,069,249 5,229,440 3.536,922 398,403 685,932 83 , 845 1,239,744 46.5 E. St. Louis 32.4 Peoria 3.5 Old oil field. . 6 1 S. 111. counties Other Illinois 0.7 10.8 "Fifteenth (Vnsus of the United States. Manufacturers: Consumption of Fuel and Electric Energy in Manufacturing- Industries; Consumption of Fu*d and Electric Energy in Mining and Quarrying Industries, 1929. U. S. Bur. Mines, Consumption of Fuel by Public Utility Power Plants, 1929. The Chicago industrial district (in Illinois) and the East St. Louis district consumed nearly 80 per cent of the industrial fuel oils used in the State. The use of fuel oils by refineries is shown in the high consumption in Crawford and Lawrence counties. The preponderance of the Chicago industrial district as a market for indus- trial fuel oils becomes still more apparent when Lake County, Ind., is added to the Illinois counties in the Chicago industrial district. Consumption of fuel oil in the combined regions compared with total consumption in the two states is as follows: Chicago district, State total Illinois and Lake (barrels) County, Ind. Illinois 11,195,716 5,229,440 Indiana 7,351 ,075 5,468,975 Total 18,546,791 10,698,415 Per cent of total of both states 57.5 RESIDUAL STOCKS 29 Unlike the furnace oils for which demand is conditioned by the demands of the heating season, the market for industrial fuel oil is determined largely by the current rate of industrial activity. With the business recession beginning in late 1937, demand for these fuels was slow and stocks accumulated more rapidly than did either gasoline or gas oil stocks with consequent low prices. With the return of industrial activity, stocks are slowly being reduced. Above map not subject to copyright. Illinois State Geological Survey. Figure 5. — Consumption of industrial fuel oils in Illinois (in- cluding crude oils and gas oils used as fuel) by market areas, 1929. 30 THE ILLINOIS OIL MARKET AREA SUMMARY OF THE ILLINOIS MARKET Among the refineries of the Central Refining District, there is a market for approximately 160,000,000 barrels of crude oil annually or the equivalent of about 440,000 barrels daily. Crude petroleum is supplied by producers in Oklahoma, Kansas, Texas, and New Mexico in the mid-Continent field and to a lesser degree by producers in Illinois, Indiana, Ohio, and Michigan in the Eastern Interior oil fields. Prior to the discovery of the Illinois basin fields, the contribution from the State was about 4,500,000 barrels a year or approxi- mately 3 per cent of the requirements of refineries in this district. The oil refining industry, through pipe line facilities and connections with producers, was organized to obtain the bulk of its crude oil requirements from the mid- Continent producing districts. Producers in these fields, through an active drilling campaign sustained over several years, were more than able to supply these crude oil needs. The rapid increase in production in Illinois following the opening of new production in the Illinois area not only disturbed the crude oil market of the mid-Continent producers ; it also supplied a quantity of oil that could not find an immediate outlet in existing refineries, due partly to inadequate pipe line facilities and partly to the reluctance of refineries to break connections entirely with producers in the mid-Continent field. This condition was corrected to some extent by the construction of gathering and trunk pipe lines and the reversal of flow in existing pipe lines so that connec- tions are now established with refineries in Lawrenceville, East St. Louis, Lemont, and Lockport from the Clay City and Noble fields, the Lake Centralia- Salem field, the Beecher City-Louden field and the Sandoval and Patoka fields. The pipe line capacity, if given preference for Illinois oil, would probably be adequate to handle the present production. Pipe line service, however, is of no avail to producers, unless refineries connecting with these pipe lines are in the market for crude oil. The practical advantage of pipe line facilities lies with those producers who are affiliated with refineries. It is natural, therefore, where there are a large number of independent producers, in a new producing district, that some among them have difficulty in finding outlets for their production. ILLINOIS OIL PRODUCTION AND REFINING CAPACITY Although crude petroleum is transported by tank car to a certain extent, particularly from newly developed fields, the most economical method is either by pipe line or water transportation. For economical movement of Illinois oil, the ultimate aim will be to effect transportation by pipe line, except in cases where refineries are located in the field itself. It is therefore of interest to survey the extent of refining capacity in the Illinois field and that connected by existing pipe line facilities. SUMMARY OF ILLINOIS MARKET 31 Refineries located in the field at Centralia and St. Elmo have an aggregate estimated capacity of 10,000 to 12,000 barrels daily, although exact data on capacities have not yet been announced. Refineries with pipe line connections to which Illinois oil is now being shipped are located in Illinois and Ohio. Refineries in Illinois have a total operating capacity of 136,410 barrels daily. At least four of these refineries, with a total daily capacity of 58,500 barrels, are taking part of their needs from the new fields in Illinois. Refineries of the Standard Oil of Ohio at Toledo and Lima, and of the Pure Oil Company at Toledo, have an aggregate capacity of 32,500 barrels ! i . i i i "T" 1 _L_ j J -h