[nth]

$this->bbcode_second_pass_quote('jaws', 'W')ell that says a lot doesn't it? Before you build another refinery you have to expect that prices will justify it in the future. If there's a risk that sweet crude will plummet then you aren't going to build another sour refinery, even though it's currently more profitable.

Managing risk is part of investing. That doesn't mean there is some conspiracy to keep down supply. That's just the way the market works.

[rockdoc123]

nth you have to remember also that the period of high prices and relatively decent refinery margins has been very, very recent history. For many years refineries have been operating at very small margins. Oil companies make future projections based on historical information. They were all around for the latest oil price low in the ninties....pretty difficult to make any profit on the refining end at $10/bbl. Until they are all completely convinced that oil prices aren't going to tank to $30/bbl in the near future and stay there for any length of time you aren't going to see new refineries factor into their business plans. Note for a good part of 2005 BP was operating on a $25/bbl price forecast. If I someone contemplating building a refinery and was watching weekly stocks reports I would not be jumping in right away, it would make sense to wait out the heating season and see how things pan out. If a CEO from one of the big companies decided to fork out hundreds of millions for a new refinery and the oil price suddenly dropped for any length of time I suspect he would be looking for a new job.

[threadbear]

"This market is ripe for exploitation by opportunistic oil companies. UCAN expects that the result of a meaningful prosecutorial investigation would reveal that oil companies – and refineries in particular --- have benefited handsomely by exploiting the current tight market supplies. The economics of the market have become so perverted that oil companies may have discovered that, like the electricity traders in 2000, they make more money in times of shortage than they can during surplus. Thus, they have a perverse economic incentive towards shortage."

http://www.ucan.org/law_policy/gasoline ... 26-04.html

[nth]

$this->bbcode_second_pass_quote('rockdoc123', 'n')th you have to remember also that the period of high prices and relatively decent refinery margins has been very, very recent history. For many years refineries have been operating at very small margins. Oil companies make future projections based on historical information.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'T')hey promise better ability to compete for oil exploration and oil refinery when they consolidated. Oil exploration- they will have more capital and more efficient management...etc. Oil refinery- they will be able to pool capital and increase in size. A few large refineries with similar capacity to many small ones will result in reduce costs.

In reality, oil exploration- they were timid in competing for new fields. Demanding high margins if successful. Not willing to be sole investor in pipelines and other field development projects. Reluctant to deal with protests.
Oil refinery- they refused to sell refineries and chose to close down. They were slow in upgrading refineries to meet new regulations. Unwilling to invest in new plants to satisfy developing world markets. Concentrated on US markets only. Tying new plants to oil field exploration. Demanded double digit profit margin.

[threadbear]

Rock Doc, The oil companies have the same pressures as any other corporation, and that's why it's absolutely imperative govt regulations against collusion and price fixing are strictly enforced.

Even better, seeing as corporations have been granted the rights of an individual, how about some of the punishments? How about the death penalty? That would keep CEOs on the up and up.

If they wish to set prices and avoid the rigors of the free market, let them declare themselves to be a functional monopoly and then let them be strictly govt. regulated.

[sol]

Do you think they are maybe pushing it?

Houston refinery fire

[Shadizar]

I think they are likely pushing harder than they should. With a good portion of the nation's refining capacity down, refiners must be under intense economical (more money to be made now) and political pressure to sustain maximum operation.

I think the bigger danger though is in what they are refining. For examply, the price of gasoline compared to diesel used to be lower. Even before the hurricaines the price of diesel was nearly equal to the price of gasoline.

Today, the price of diesel is significantly higher than gasoline. I'm concerned a great deal about the effects this will have on the transportation of goods (as other posts address).

-Shadizar

[Barlow]

Without reading every post on this thread, I'm going to add my vote to the "Won't get fooled again" theory. As pointed out early in the thread, the industry had over built by 1980. By 1983 with the world recession in full swing, the US refineries were operating at just less than 70% capacity. Not good for billion dollar investments.

It took until about the late 1990's for US gasoline consumption to return to 1980 levels. Now add to that the expense of a new refinery. And the proprietary knowledge that Cheney's industry buddies took with them into his National Energy Policy advisory meetings. There's no way the US is going to build another refinery. Our need will pass. Soon.

[BabyPeanut]

$this->bbcode_second_pass_quote('', '[')url=http://www.electricity.doe.gov/documents/gulfcoast_report_112805.pdf]
OFFICE OF ELECTRICITY DELIVERY AND ENERGY RELIABILITY (OE)
U.S. DEPARTMENT OF ENERGY
Gulf Coast Hurricanes Situation Report #43 (link)[/url]
November 28, 2005 (3:00 PM EST)

...skip...

REFINERY IMPACTS FROM GULF COAST HURRICANES
as of November 21
$this->bbcode_second_pass_code('', 'Company Location Capacity (B/D) Status
============== ============== ============== =============
ConocoPhillips West Lake, LA 239,400 Reduced rate
Lyondell Citgo Houston, TX 270,200 Reduced rate
BP Texas City, TX 437,000 Shut down
-------------- -------------- -------------- -------------
SubTOTAL 946,600

ConocoPhillips Belle Chasse 367,000 Shut down
Murphy Oil Meraux / Shut down
-------------- -------------- -------------- -------------
TOTAL 1,313,600 ')

[pup55]

I think this has been basically the same for about three weeks.

Which means, at some point, these facilities have to be considered "permanently screwed up". Your guess is as good as mine as to who decides this, and how it is accounted for.

I am a little puzzled by the plant in Texas City. That's down by Houston, and should not have been hit hard by Rita, except that is also the plant that had all of the explosions, etc. all summer long. The other ones, in Louisiana, are probably attributable to flood damage. Nothing will ruin your day worse than a flood in one of these big plants, because it really screws up the control systems and electric motors for all of the pumps, etc.

On the other hand, after a couple of weeks, most of these motors can be replaced pretty easily, so you have to wonder if one of the main reactors sustained a lot of damage.

Maybe one of the members can give us better information.....

[kmann]

The 437,000 bpd BP refinery is supposed to start producing gasoline in mid December and I believe full rate about a month later. Last news I read about ConocoPhillips Belle Chasse said startup at the end of December or early 2006. Also, I remember reading somewhere that 804,000 bpd are currently shutdown from the hurricanes, so I'm guessing that some more capacity has come online since the Nov. 21 report quoted here.

edit: the 804,000 number is in the report quoted above
$this->bbcode_second_pass_quote('', 'T')otal Shut down
(Katrina + Rita)= 804,000

[GreyZone]

The Texas City plant needed major overhauls to address the safety issues uncovered during investigation of the recent explosions and fires. This downtime was originally planned for next year, I believe, but when Rita shut the plant down early, the decision was made to do the revamp while it was already down. Restarting a refinery is a big deal so shutting it down again and restarting it later for maintenance when it was already down was seen as problematic. The Texas City facility will return to full operation in due time.

[bruin]

Wow, what a deal this is. Point to this when people say it's a refinery problem we are having.

Plans for a new refinery in Arizona, the first new one in the US for over 30 years, can't find a source of oil to use. They were hoping for oil from Mexico but they say they can't do it, nor can Canada.

We all know we don't need any more refineries. Oil production is decreasing.

Arizona Refinery Troubles

[something_awfull]

meh, at least they didnt build it then find out there was no oil. what a grand PO monument that would have been.

for sale: brand new oil refinery, one lady owner only.

[PeakOiler]

Good find! Thanks for the link.

So this is not a NIMBY issue, nor a permitting issue. Seems to me this is similar to the reasons more natural gas power plants are not getting built in the US, or at least not at the rate of construction in the '90's.
Another sign of the times.

When existing refineries start closing due to lack of supplies, you think people might start accepting PO?

[advancedatheist]

This pretty much blows up the propaganda that blames the lack of new refining capacity in the U.S. on "environmentalists." Even when a company has every legal impediment removed to building a brand, spanking new refinery in a state with lax environmental standards, next to an oil-exporting country with even weaker environmental standards, it can't get oil from Pemex because Cantarell has already started to decline. What a delicious irony.

[pea-jay]

But you know this reason will never get any real traction. If this refinery dies, it will be a quiet one and most will continue to assume it was those damn environuts that killed it.

[splitrock]

I've suspected for sometime now that is exactly why the oil companies weren't building them. It made much more sense to them to simply tweak the ones in existence.

[Specop_007]

$this->bbcode_second_pass_quote('PeakOiler', 'G')ood find! Thanks for the link.

So this is not a NIMBY issue, nor a permitting issue. Seems to me this is similar to the reasons more natural gas power plants are not getting built in the US, or at least not at the rate of construction in the '90's.
Another sign of the times.

When existing refineries start closing due to lack of supplies, you think people might start accepting PO?