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OR1 Case 1

You are in charge of the Dawson Creek oil refinery which produces gas and heating oil from crude oil. Gas sells for $11 per barrel if it is at least grade 9, and heating oil sells for $6 per barrel if it is at least grade 7. The refinery can process incoming crude oil using three different methods that yield different amounts and grades of oil at varying costs per barrel. Lower grades can be further processed in a catalytic cracker to improve their grade for an additional cost. You must determine the optimal processing method and cracking to maximize the refinery's profit within the constraints of selling at most 2,000 barrels of gas and 600 barrels of heating oil.

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Alvaro Laureano
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193 views

OR1 Case 1

You are in charge of the Dawson Creek oil refinery which produces gas and heating oil from crude oil. Gas sells for $11 per barrel if it is at least grade 9, and heating oil sells for $6 per barrel if it is at least grade 7. The refinery can process incoming crude oil using three different methods that yield different amounts and grades of oil at varying costs per barrel. Lower grades can be further processed in a catalytic cracker to improve their grade for an additional cost. You must determine the optimal processing method and cracking to maximize the refinery's profit within the constraints of selling at most 2,000 barrels of gas and 600 barrels of heating oil.

Uploaded by

Alvaro Laureano
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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You have been put in charge of the Dawson Creek oil refinery. The refinery produces
gas and heating oil from crude oil. Gas sells for $11 per barrel and must have an
average grade level of at least 9. Heating oil sells for $6 a barrel and must have an
average grade level of at least 7. At most, 2,000 barrels of gas and 600 barrels of
heating oil can be sold. Incoming crude can be processed by one of three methods. The
per barrel yield and per barrel cost of each processing method are shown in Table 75.
For example, if we refine one barrel of incoming crude by method 1, it costs us $3.40
and yields .2 barrels of grade 6, .2 barrels of grade 8, and .6 barrels of grade 10. These
costs include the costs of buying the crude oil. Before being processed into gas and
heating oil, grades 6 and 8 may be sent through the catalytic cracker to improve their
quality. For $1 per barrel, one barrel of grade 6 can be cracked into a barrel of grade
8. For $1.50 per barrel, a barrel of grade 8 can be cracked into a barrel of grade 10.
Determine how to maximize the refinerys profit.

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