Gas Prices Rise on Refineries’ Record Failures

[BeyondGeography]

Source: New York Times

By JAD MOUAWAD
Published: July 22, 2007

Oil refineries across the country have been plagued by a record number of fires, power failures, leaks, spills and breakdowns this year, causing dozens of them to shut down temporarily or trim production. The disruptions are helping to drive gasoline prices to highs not seen since last summer’s records.>

<...As a whole, refining disruptions have been considerably higher than in previous years: they averaged 1.5 million barrels a day in the first quarter, compared with 700,000 to 900,000 barrels a day from 2001 to 2005. In the days after the hurricanes, refiners were forced to briefly halt as many as five million barrels of production. In 2006, when refiners were still reeling from the impact of the hurricanes, disruptions in the first quarter averaged 1.35 million barrels a day...The refining crunch has pushed wholesale gasoline prices up 35 percent this year and has contributed to a 23 percent gain for crude oil prices. Oil futures in New York closed at $75.57 a barrel on Friday.

<...Meanwhile, refiners have been scrambling to meet a raft of environmental regulations, phase out toxic additives, add ethanol to the fuel mix and introduce new ultralow sulfur standards for gasoline and diesel. Industry insiders attribute much of the fragility of refining operations to the difficulty of making these cleaner fuels.>

<...Meanwhile, demand has been rising relentlessly, providing little respite to the nation’s aging energy infrastructure. Even as consumers complain loudly about high prices, they show no signs of scaling back. Gasoline consumption reached 9.66 million barrels a day in the first week of July, the second-highest level on record.>





Read more: http://www.nytimes.com/2007/07/22/business/22refine.html?hp

---

COMMENT: Parts of this article read like an oil industry press release, especially the ritual complaint about the impact of environmental regs. OSHA comes in for some criticsm for not doing enough refinery inspections, and there is sourced criticism of the industry's failure to invest in modern equipment. Then again, with consumption as high as it is, they have the perfect foil for rising prices.

[razors edge]

1. Blaming the refineries for high prices

is like blaming any overworked, underfunded industry. It may feel good but it won't stop the problem.

Production is always limited by capacity, which is limited by capitol investment. Once you reach a point where long term profitability is no longer expected, maximizing capitol from existing investment is the only interest, any further investment makes about as much sense as polishing the brass hand rails on the Titanic as it sank.

The United States has not built a new refinery in the last quarter century, that alone tells me that the end of oil is coming sooner than we think.

[unkachuck]

2. likely story....

"Oil refineries across the country have been plagued by a record number of fires, power failures, leaks, spills and breakdowns this year..."

....if the corporate oil industry can't run a refinery maybe a 'left-wing' government could; maybe we could ask Hugo?....elect only progressives to office and we'll create, Petro-USA....

....we won't be able to create anymore oil but we sure could price, acquire and distribute it more fairly....

....like with corporate healthcare, why keep the PROFITEERS in the middle and in control?....

[1932]

3. Reminds me of the fake shut downs that intentionally drove up electricity prices

in California when Enron owned the power company that was making all the money off high electricity prices.

[alarimer]

4. They are making record p;rofits and can't even fix their refineries?

I think they are doing it on purpose to drive up prices.

[brentspeak]

6. Bingo

The U.S. taxpayer pays billions of dollars in subsidies a year to the oil industry -- the most profitable industry in the nation, by far -- but the oil industry, amazingly, doesn't seem to know how to use a wrench properly when it comes to the refineries.

[Tatiana]

31. I am down with Petro-USA. n/t

[Mountainman]

5. Will we ever hear that refineries have over produced causing prices to drop?

Never. This is contrived IMHO.

[Miss Chybil]

7. How convenient...

"Greatest country in the world" and we can't get a little refinery action going. You'd think the same people who are running Iraq are running this place.


:shrug:

[Zorra]

8. If the private sector cannot safely and efficiently manage the production

distribution of oil, a natural resource that is critical to national security, then it may be time to nationalize the ownership and management of the industry.

[RUMMYisFROSTED]

9. s

:wow:

/s

[Thothmes]

10. Manage Production

Imagine, would really want the same people that run FEMA to operate the refineries in this country

[brentspeak]

11. FEMA is headed by political appointees

A nationalized oil industry could be staffed by competent civil servants who aren't toadies of a corrupt White House.

[happyslug]

12. Increase accident? Compatible with having to refine "Sour" oil instead of "Sweet" Oil.

"Sour" and "Sweet" are terms of art in the Oil Industry. Sour oil, is oil which contains more than 1% hydrogen sulfide (H2S). The sulfide MUST be removed before it can be processed. From what I have read, almost ALL of the new oil being introduced into the market is "Sour oil". When you have to refine Sour oil, Refineries MUST do more maintenance, so parts wear out quicker do to the hydrogen sulfide (H2S) AND accidents increase for the Sulfide erode parts quicker than if the plant was refining "Sweet Oil". Thus the accidents, and reduction of refineries being on line may have to do with the fact Sweet oil is in decline and all that can be found to replace Sweet oil in Sour oil. The more Sour oil that a plant has to refine, the more down time in the refinery do to increase maintenance AND do to increase accidents as the Sulfide eats at the various parts of the Refinery.

None of this is mentioned in the Article, but explains the INCREASE accidents better then the excuse used in the auricle.

Definition of "Sour" oil:
http://en.wikipedia.org/wiki/Sour_crude_oil

[mbperrin]

27. Actually, valves and parts are trimmed for different oils

For example, a WKM standard valve trim is T-21, all steel parts, for standard service, T-22 adds some stainless steel internal parts, like the gate and seats for "mild" sour service, all the way up to T-26, all stainless everything, and in addition, various manufacturers offer ceramic type valves and so on. These valves and fittings are used so that there is not more wear of the parts. These parts are resistant and appropriate for the service they are in.

Consolidation of the industry with all the buyouts in the last 30 years, and the ability to operate as an oligopoly without fear of new competitors are what drive prices and decreasing facilities. For instance, in Odessa, Texas, where I am, there were 8 local refineries when I was a kid in the 1950s here, including one that made gasoline from natural gas, which at that time was usually burned off at the wellhead as an undesirable waste product. They are all gone, not because they were worn out, because the natural gasoline plant was disassembled and shipped to the Soviet Union in the mid 80s, while the others, including the last to go, the Shell refinery, was also disassembled and shipped to the Beaumont Port Arthur area of Texas for parts.

We used to ship gasoline to the Texas coast by pipeline and now we buy it from there from the reverse flow of the same line. The industry has made scale of production large enough and complains about all the problems loudly enough to discourage new entrants into the field. Same principle of any self employed type around here - ask them how they are doing, and they'll say, just getting by. Because if they say, Life could not be better, we are getting stinking rich while doing almost nothing, they know they are inviting competition. American business hates competition. They love profits. And the industry has done a fabulous job of replacing competition with collusion, and they are making those profits!!!

[Demeter]

13. Record Failures at Oil Refineries Raise Gas Prices

Source: NYTimes


Oil refineries across the country have been plagued by a record number of fires, power failures, leaks, spills and breakdowns this year, causing dozens of them to shut down temporarily or trim production. The disruptions are helping to drive gasoline prices to highs not seen since last summer’s records.

These mechanical breakdowns, which one analyst likened to an “invisible hurricane,” have created a bottleneck in domestic energy supplies, helping to push up gasoline prices 50 cents this year to well above $3 a gallon. A third of the country’s 150 refineries have reported disruptions to their operations since the beginning of the year, a record according to analysts...American refiners are running roughly 5 percent below their normal levels at this time of the year.

“You have a system that is taxed to the limit,” said Adam Robinson, an energy research analyst at Lehman Brothers. “This is what happens when spare capacity is eroded.” After Hurricanes Katrina and Rita disrupted the nation’s energy lifeline two years ago, oil companies delayed maintenance on many of their plants to make up for lost supplies and take advantage of the high prices. But, analysts say, they are now paying a price for deferring repairs.

As a whole, refining disruptions have been considerably higher than in previous years: they averaged 1.5 million barrels a day in the first quarter, compared with 700,000 to 900,000 barrels a day from 2001 to 2005. In the days after the hurricanes, refiners were forced to briefly halt as many as five million barrels of production.


Read more: http://www.nytimes.com/2007/07/22/business/22refine.html?ref=business

---

But of course, we don't need any new refineries! Where's the profit in that?

[Lorien]

14. "Accidents" I suppose

yeah, riiiight.

[Demeter]

15. Excessive Wear and Tear, Corner Cutting, and Greed

[sofa king]

21. Especially greed.

I was temping at the American Chemistry Council--Karl Rove's EPA--when Hurricane Katrina hit. Within two days, every member corporation with a chemical plant on the Gulf Coast had reported in: no significant damage. Not one plant was unprepared to restart operations by the time power was restored a few days or at most weeks later.

At the same time, half a dozen other chemical plants in the same area, better known as oil refineries, reported massive damage and months offline. The oil refineries and the chemical plants use essentially the same hazard analysis, construction layouts, power sources, and safety procedures. But somehow, theirs broke while the ones I was watching didn't.

The oil companies were tanking so that they could drive up gasoline prices. I'm certain of it. They'll do it again, whenever they get the chance.

[Harper_is_Bush]

16. Good. I hope gas prices go through the roof.

Can't understand why they're kept so low in the USA. Canada pays far more, and Europe pays more still.

[Psephos]

18. Gasoline cost increases are regressive

They harm poor people disproportionately.

I could see taxing gasoline to curb demand, but then rebating/exempting poorer people. High prices, OTOH, just mean poor people are sending a good proportion of their energy expenditures to foreign oil suppliers.

[Harper_is_Bush]

20. If you factor in global warming, then poor people would be best served with higher prices

consumption needs to be curbed, period.

Unless that happens, it will remain at current levels and the effects of global warming - known to impact poor people the most - will be worse.

"Poor people" always need to make choices with their limited resources. Perhaps a car is a bad choice for some.

[MikeNearMcChord]

23. And if there is no alternative like mass transit?

Let them eat cake,eh? Come down off that high horse and see how they live before you make such cavalier statements

[Harper_is_Bush]

24. Most cities have mass transit. Quite frankly, I could care less if higher gas prices

impact SOME poor people (who can afford cars) who live in areas with no mass transit.

You judge me to not be able to relate to poor people. How dare you.

You obviously have no appreciation of the added suffering global warming is predicted to inflict on poor people not just in the USA, but around the globe. The poorest nations will suffer the most. And you sit there and whine about poor people not being able to afford gas? My god.

[spinbaby]

28. You're right

The poor are hurt most. I don't know how they make it

We're fairly average middle-class types and we're feeling the energy pinch big time--anyone who's not actively wealthy is feeling it.

[Psephos]

17. Sounds like building a new refinery could be an opportunity for a public-private initiative

Certainly looks like the economic opportunities are good. I'd support building one here in Michigan (under good environmental protocols) as an economic stimulation.

Currently, we make up the shortfall in US gasoline by importing it via tanker. I'd rather have modern, ecofriendly US refineries feeding the pumps instead of foreign refineries who do who knows what. And I'd rather keep some of those dollars we're adding to the trade deficit when we buy foreign gasoline.

[ohio2007]

19. article doesn't fit my area. gas is down to $2.70/gal

even saw it at $2.68 yesterday.

I suppose some sort of glut needs burned off before prices get jacked to $5 gal predictions for this summer.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x277655

just cruising the archives, doing the "That was then,this is now" comparison predictions

[styersc]

22. I can hear the Church Lady say, "How conveeeeeennnnient".

[tired_old_fireman]

25. They should correct the headline.

Record oil company CEO pay raises gas prices.

[Demeter]

26. Last Month Our Refinery Source Had a Fire and Went Down

and gas jumped 40 cents. Now it's back down to $2.99

Way to run the country, dudes! Right into the ground.

[auburngrad82]

29. This only because there have been no hurricanes to "disrupt" production

Who are they trying to kid? They're still going to be paying million dollar bonuses to the executives and we're paying out the ass. I personally don't believe a word the oil companies say. It's bullshit.

[Name removed]

30. Deleted message

Message removed by moderator. Click here to review the message board rules.

[YellowRubberDuckie]

32. I keep thinking...

...self-sabotage.