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 Let Pd, P2, Pf, and Cr be, respectively, the price (per gallon)
for diesel fuel, No. 2 fuel oil, FOR, and the cost of transporting FOR to
the refinery and refining. The total net income to the Navy is compared
for the following two options:
User buying FOR and burning it as boiler fuel:
1.
Gain/
Revenue/
Budget
Savings
cost
Fuel Depot
0
User
P2
P 2- Pf
Total savings
R2
to-the Navy
User buying refined FOR and using it as diesel fuel:
2.
Gain/
Revenue/
Budget
cost
Savings
Fuel Depot
P d- Cr
Pd
cr
User
0
Pd
Pd
Total savings
P d- Cr
to the Navy
Thus, since P2 and Pd are usually the same, the Navy will realize
less savings by the refining option, the difference being the costs for
refining, Cr. In other words, for each gallon of FOR refined, the Navy
loses C (about 20). This does not include the costs due to material
losses ( FOR cannot be totally converted to diesel fuel) and waste disposal
(residue from refining).
In conclusion, to refine FOR into diesel fuel will cost the Navy at
least Cr per gallon. For locations where FOR is generated, but there is
no demand for fuel oils, it is recommended that the FOR be transported to
the closest user for boiler firing. (Remember that for refining, the FOR
must be transported to the refinery site, regardless.)
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