# Refining and reforming: Unit economics

Why refiners live on a sliver of the pump price

Source page: https://www.materialinsights.org/energy/e_refining/economics/

What this tab covers What it costs to move a unit of energy this way: capital and operating costs, tariffs, utilisation and how it compares with the alternatives.

Refining is a thin-margin, high-volume business: crude is about half the pump price and refining costs plus profit about a seventh. Grey hydrogen is cheap because gas is cheap; fuel is about three-quarters of its cost.

#### Key costs

| Measure | Value | Note |
|---|---|---|
| **Refining costs and profits in US gasoline price** | 14.3% of 3.10 USD/gal, about 0.44 USD/gal or 19 USD per barrel of gasoline (calculated) USD/gal (2025)^[7](https://www.eia.gov/energyexplained/gasoline/factors-affecting-gasoline-prices.php) | Crude was 51.4% of the price; 2016 to 2025 average refining share 15.0% |
| **New refinery capital cost (Dangote)** | about 19 billion USD for 650,000 b/d, about 29,000 USD per b/d (calculated) USD per barrel per day (total cost as reported, nominal)^[8](https://www.nsenergybusiness.com/projects/dangote-refinery-lagos/)^[18](https://www.spglobal.com/energy/en/news-research/latest-news/crude-oil/011424-nigerias-long-awaited-dangote-refinery-starts-diesel-jet-fuel-output) | Includes polypropylene and large hydrogen units; began producing fuels in January 2024 and was expected to reach full capacity around mid-2025 |
| **Grey hydrogen (SMR, no capture)** | 1.06 USD/kg (2018 USD)^[9](https://www.netl.doe.gov/projects/files/ComparisonofCommercialStateofArtFossilBasedHydrogenProductionTechnologies_041222.pdf) | Gas at 4.42 USD/MMBtu, 483,000 kg/day plant, 90% capacity factor; capital 713 USD per kg/day, about 340 million USD in total (calculated) |
| **SMR with 96% CO2 capture** | 1.64 including CO2 transport and storage USD/kg (2018 USD)^[9](https://www.netl.doe.gov/projects/files/ComparisonofCommercialStateofArtFossilBasedHydrogenProductionTechnologies_041222.pdf) | Autothermal reforming with capture: 1.59 |
| **Coal gasification hydrogen** | 2.58 (no capture); 3.09 (with capture) USD/kg (2018 USD)^[9](https://www.netl.doe.gov/projects/files/ComparisonofCommercialStateofArtFossilBasedHydrogenProductionTechnologies_041222.pdf) | Capital 5,243 USD per kg/day, about 7 times SMR |
| **Coal-to-liquids capital (Ningxia, 4 Mt/yr)** | about 55 billion yuan, roughly 90,000 to 100,000 USD per b/d (calculated, assuming about 7.6 barrels per tonne and 6.5 to 7.3 yuan per USD) USD per barrel per day^[13](https://www.sustainable-carbon.org/blogs/visiting-the-worlds-biggest-single-coal-to-liquid-project-in-yinchuan-china/) | About three times a new oil refinery per unit of capacity |
| **Refinery CO2** | 40.7 (range 13.9 to 62.1 by country) kg CO2-eq per barrel^[5](https://eao.stanford.edu/publications/journal-articles/carbon-intensity-global-crude-oil-refining-and-mitigation-potential) | 2015 global average, volume-weighted |

#### Where the money goes

| Item | Share or amount |
|---|---|
| **SMR: natural gas** | about 73% of hydrogen cost (calculated from NETL)^[9](https://www.netl.doe.gov/projects/files/ComparisonofCommercialStateofArtFossilBasedHydrogenProductionTechnologies_041222.pdf) |
| **SMR: capital** | about 13%^[9](https://www.netl.doe.gov/projects/files/ComparisonofCommercialStateofArtFossilBasedHydrogenProductionTechnologies_041222.pdf) |
| **SMR: operations and maintenance** | about 15%^[9](https://www.netl.doe.gov/projects/files/ComparisonofCommercialStateofArtFossilBasedHydrogenProductionTechnologies_041222.pdf) |
| **Coal gasification: capital / fuel / O&M** | about 45% / 17% / 37%^[9](https://www.netl.doe.gov/projects/files/ComparisonofCommercialStateofArtFossilBasedHydrogenProductionTechnologies_041222.pdf) |
| **Refining: energy use** | Fired heaters dominate: fuel is 77 to 99% of energy input to the main units^[6](https://www.energy.gov/sites/default/files/2013/11/f4/bandwidth.pdf) |

Worked example (calculated): at NETL's 1.06 USD/kg, a 483,000 kg/day SMR running 90% of the year makes about 159,000 t of hydrogen a year, worth about 168 million USD, of which roughly 123 million USD (73%) is gas. At 4.42 USD/MMBtu that implies about 0.175 MMBtu of gas per kg, so each 1 USD/MMBtu rise in gas price adds about 0.18 USD/kg. This is why grey hydrogen costs track gas prices.

#### Sources

1. [Carbon intensity of global crude oil refining and mitigation potential (Jing et al.), Nature Climate Change](https://eao.stanford.edu/publications/journal-articles/carbon-intensity-global-crude-oil-refining-and-mitigation-potential) Stanford University / Nature, 2020
2. [Energy Bandwidth for Petroleum Refining Processes](https://www.energy.gov/sites/default/files/2013/11/f4/bandwidth.pdf) US Department of Energy (Energetics Inc.), 2006
3. [Gasoline explained: Factors affecting gasoline prices](https://www.eia.gov/energyexplained/gasoline/factors-affecting-gasoline-prices.php) US Energy Information Administration, 2026
4. [Dangote Refinery, Lagos (project profile, 2021; completion dates in it are out of date)](https://www.nsenergybusiness.com/projects/dangote-refinery-lagos/) NS Energy, 2021
5. [Comparison of Commercial, State-of-the-Art, Fossil-Based Hydrogen Production Technologies](https://www.netl.doe.gov/projects/files/ComparisonofCommercialStateofArtFossilBasedHydrogenProductionTechnologies_041222.pdf) National Energy Technology Laboratory, US DOE, 2022
6. [Visiting the world's biggest single coal-to-liquid project in Yinchuan, China](https://www.sustainable-carbon.org/blogs/visiting-the-worlds-biggest-single-coal-to-liquid-project-in-yinchuan-china/) IEA Clean Coal Centre (sustainable-carbon.org), 2017
7. [Nigeria's long-awaited Dangote refinery starts diesel, jet fuel output](https://www.spglobal.com/energy/en/news-research/latest-news/crude-oil/011424-nigerias-long-awaited-dangote-refinery-starts-diesel-jet-fuel-output) S&P Global Commodity Insights, 2024

## Other sections

- [Summary](https://www.materialinsights.org/energy/e_refining/index.md)
- [Overview](https://www.materialinsights.org/energy/e_refining/overview/index.md)
- [Correlation](https://www.materialinsights.org/energy/e_refining/correlation/index.md)
- [Science and limits](https://www.materialinsights.org/energy/e_refining/science/index.md)
- [Value chain](https://www.materialinsights.org/energy/e_refining/valuechain/index.md)
- [Engineering methods](https://www.materialinsights.org/energy/e_refining/methods/index.md)
- [Equipment and suppliers](https://www.materialinsights.org/energy/e_refining/equipment/index.md)
- [Relationships](https://www.materialinsights.org/energy/e_refining/links/index.md)