Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Oil Refinery

What it is:

An oil refinery is a factory that turns crude oil into marketable products such as gasoline, jet fuel, lubricants and heating oils.
 

How it works (Example):

Refining oil is complicated, but generally the idea is to heat the crude oil, separate it out, and add things to the separated portions to formulate products.

Why it Matters:

In the business world, refineries are important because they control the production and accessibility of oil. For example, when a refinery shuts down, a whole region of the country may have a shortage of a certain kind of fuel, causing prices to spike. Though the fuel could be shipped from other refineries, doing that is expensive and takes time. For these reasons, commodities traders and virtually every other investor who knows how oil prices affect every industry (from food to airlines to autos) pay attention when a refinery is shut down for maintenance or emergencies. The fewer refineries are open, the more expensive oil tends to become.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...