A density-method-based model for allocating the refining cost of gasoline and diesel in China

In this paper, we present a density-method-based model to allocate the refining cost to petroleum products such as gasoline and diesel. By using this model, we also present an empirical study of China, which is based on a virtual crude oil refining process proposed referring to the technical configuration of oil refining industry in China. Three scenarios of the cost of gasoline and diesel are illustrated referring to different settings of the change of the international crude oil prices. The results indicate that the cost of gasoline and diesel change nearly the same amplitude as the change of crude oil price. However, the margin between the cost of gasoline and diesel will slightly increase with the rise of crude oil price. Besides, we also present a sensitivity analysis of the operation cost of each unit in the refining process. The results reveal that the operation cost of catalytic reforming is the most important influencing factor of the cost of gasoline, while the operation cost of hydrogen cracking influences the cost of diesel mostly.