Oil Refinery question....Big Oil angle...

[HardWorkingDem]

One of the biggest complaints of conservatives is of a lack of oil refineries in the US. Does anyone know if this is the failure of Big Oil to build additional ones or is it prohibited by US regulations?

I would tend to believe it is purposely done by Big Oil to control the flow of oil and prices of oil products better.

[leftofthedial]

1. same as California in 1999-2000

big oil has intentionally kept supply down by not building infrastructure

[Massacure]

2. It started with NIMBY, then the oil companies liked the lack of refineries

So they just abandoned the idea of building new ones.

[htuttle]

3. Big Oil has been whining about environmental regulations

But that's a false argument. When was the last time environmental activists actually won on an issue in the US? Certainly not since 2000, anyway. There is very little preventing them from building new refineries, other than their own business decisions.

Big Oil ultimately wants the US to suspend any regulations regarding refineries, AND subsidize new refinery construction. Then they can move into the facility federal dollars paid for, and just sit back and collect the money (as usual).

I say, bullshit on that.

[Igel]

18. But it's not on the 'issues' that the battle is fought.

It's in the environmental impact statements at the local, state, and federal level, and the regulations that are in place at the local, state, and federal level.

Combine that with lawsuits and the threat of lawsuits over whether the refineries are ok, as well as over whether the impact statements were drawn up properly, with proper public input, and whether the local/state/federal agencies examined them properly.

Start a refinery now ... and in years you're still in the courts. It was the same with power generation facilities in Calif. in 1999/2000: quickly the argument that the facilities could easily be built was buried in a ton of evidence that the last few times anybody had tried, they had floundered for years in red tape and lawsuits.

[Atman]

4. Big Oil claims they cost too much

They want the government to build/subsidize them.

Pay no attention to the record profits behind the curtain.

Exxon could build an ENTIRE NEW REFINERY on its last quarter PROFITS alone. But they won't. Why not? It will impact "profitability." If they spend that money, it won't show up as profit and they won't get to pay themselves (and the rest of the shareholders) dividends. So they demand that we, the taxpayers, PAY TWICE for a refinery they could easily build themselves, with their sofa change -- once at the pump, then again on April 15th.

Oh, speaking of April 15th, of course, BushCo made sure those dividends don't get taxed. Sweet deal.

[FloridaPat]

5. Story is it takes 8-12 years to pay for them and the oil companies

can't see investing the money. I got that from Mike Ruppert on fromthewilderness.com.

[ThomWV]

6. NIMBY (Not In My Back Yard)

There isn't a community in the nation that would not fight the building of a refinery.

EPA has regulations on the books that make it nearly impossible to build a new refinery anywhere in the US.

If lack of refinerys helps keep oil company profits up what is the incentive to build them?

You see, oil really is different.

[Roland99]

16. This is one thing that sort of slaps the left back in the face as...

they are the ones typically fighting against new refineries.

Too bad our government hasn't looked into the future for alternative fuels knowing this day would someday come.

[cthrumatrix]

7. the truth is the US had 300+ refineries...now down 50% due to oil mergers

of big oil : chevron/texaco & exxon /mobile to name a few...

all this was done with govt approval...

they knew of energy usage and patterns years ago

[Extend a Hand]

8. why build refineries

Big oil knows that would be a dumb capital investment when there won't be enough oil to refine.

[sandnsea]

9. They EXPANDED existing refineries

As they added newer technologies, they closed smaller refineries and expanded larger ones. There is enough refineries to handle the amount of oil that is pumped. The refinery argument is pretty much fabricated based on manipulation of numbers.

[RightSightBrightLite]

10. evidence from web slueth, capitalism knows NO HomeLand

On June 21, the Los Angeles Times ran a story that the ever-growing
'Peak Oil' crowd seems to have missed. The article concerned the
Shell oil refinery in Bakersfield, California that is scheduled to
be shut down on October 1 -- despite the fact that the state of
California (and the nation as a whole) is already woefully lacking
in refinery capacity.

Now why do you suppose that Shell would want to close a perfectly
good oil refinery? It can't be because there is no market for the
goods produced there, since that obviously isn't the case. And it
isn't due to a lack of raw materials, since the refinery sits, as
the Times noted, atop "prolific oil fields." The Scotsman recently
explained just how prolific those fields are:

The best estimates in 1942 indicated that the Kern River field in
California had just 54 million barrels of remaining oil. By 1986,
the field had produced 736 million barrels, and estimates put the
remaining reserves at 970 million barrels.
(http://news.scotsman.com/index.cfm?id=578462004)

Of course, just because there is a strong demand for a product, and
a ready source of raw materials with which to produce that product,
does not mean that any corporate entity is obligated to bring that
product to market. In the corporate world, the only thing that ever
matters is the "bottom line," because corporations exist for one
purpose only: to generate profits. So the only question, I suppose,
that really matters, is: can the refining of gasoline and diesel
fuel at this particular facility generate profits for the
corporation?


One would naturally assume, given Shell's decision to close the
refinery, that the answer to that question is "no." But that would
be an entirely wrong assumption, since the truth is, as L.A. Times
reporters discovered when they got their hands on internal company
documents, that the refinery is wildly profitable. How wildly
profitable? The Bakersfield plant's "profit of $11 million in May
<2004> was 57 times what the company projected and more than double
what it made in all of 2003." (Elizabeth Douglas "Shell to Cut
Summer Output at Bakersfield Refinery, Papers Say," Los Angeles
Times, June 21, 2004)

Go ahead and read that again: "more than double what it made in all
of 2003." In a single month! And 2003 wasn't exactly what you would
call a slow year at the Bakersfield refinery. According to Shell
documents obtained by the Foundation for Taxpayer and Consumer
Rights, "Bakersfield's refining margin at $23.01 per barrel, or
about 55 cents profit per gallon, topped all of Shell's refineries
in the nation."
(http://releases.usnewswire.com/GetRelease.asp?id=114-04062004)


Let's pause briefly here to review the situation, shall we? There
is a product (gasoline) that is in great demand, and that will
always be in great demand, since the product has what economists
like to call an "inelastic" demand curve; for many months now, that
product has been selling for record-breaking prices, especially in
the state of California, and there is no indication that that
situation will change anytime soon; there are abundant local
resources with which to produce that coveted product; and, finally,
there is a ridiculously profitable facility that is ideally located
to manufacture and market that product.


Given that situation, what response would we normally expect from
that facility's parent corporation? Sit back and let the good times
roll? Attempt to increase production at the facility and rake in
even greater profits? Sell the facility and make a windfall profit?
Or, tossing logic and rationality to the wind, shut the facility
down and walk away?


That last one, of course, is what Shell has chosen to do. And this
story, believe it or not, gets even better:

The internal documents obtained by the Times, including a refinery
output forecast, indicate that Bakersfield will soon be producing
far less than its capacity. After relatively high output rates in
May and early June, Shell plans to cut crude oil processing about
6% in July and another 6% in August, according to the forecast.
Those two months are when California's fuel demand reaches annual
peak levels.
Aamir Farid, the general manager of the Bakersfield refinery, was
asked the reason for the plan to reduce output at the time of peak
demand. Farid claimed that he was not aware of any such plan, but
he added that if there was such a plan, "there is a good reason for
it." However, he also added that, "off the top of my head, I don't
know what that good reason is."


And why would he? Certainly the manager of the refinery can't be
expected to know why his facility is planning to dramatically
reduce output, can he? The best explanation that Farid could come
up with was to speculate that there "could be maintenance planned
or projections for a shortfall of crude." Neither of those
scenarios are very plausible, however.


Bakersfield, whose suburbs include Oildale and Oil Junction, won't
likely be facing a shortfall of crude anytime soon. And as for the
notion of planned maintenance, I doubt that anyone actually
believes that Shell plans to perform two months worth of
maintenance work on a facility that will be permanently shuttered
just one month after that work is completed.


To be fair, I suppose it could be the case that Shell, being the
benevolent giant that it is, wants to get the place in tip-top
shape for the new owners -- except that there are no new owners,
primarily because "Shell didn't search out potential buyers for the
refinery once it decided to shutter it." Indeed, Shell actively
avoided finding a buyer for the plant (which became a fully-owned
Shell asset just three short years ago), since any new owner would
probably object to the bulldozers and wrecking balls that Shell
plans to bring in just as soon as the refinery's doors have closed.
("FTCR uncovered a timetable showing decommissioning and demolition
are set to begin immediately after the refinery's shut down date."
http://releases.usnewswire.com/GetRelease.asp?id=114-04062004)


Can any of you 'Peak Oil' boosters out there think of any
legitimate reason why a purely profit-driven corporation would
acquire an outrageously profitable asset and then proceed to
deliberately destroy that asset? ... because I have to tell you, I
have been struggling to come up with an explanation on my own and
the only one that I've got so far is that the corporation might be
involved in some kind of conspiracy to manufacture an artificial
shortage of a crucial commodity. I know that 'Peak Oil' theory
holds that we don't need the refinery capacity because, you know,
we're running out of oil and all, but that doesn't explain why a
tremendously profitable refinery isn't being kept in operation at
least until all the local wells have run dry, does it?


Shell will, by the way, continue to operate its Martinez,
California refinery -- for now at least. The Martinez facility is
also wildly profitable, showing a "net profit of $34 million in
May." That tidy profit was, as it turns out, "just shy of Shell's
profit expectations at Martinez for all of 2004." Strangely enough,
the Martinez facility, like the one in Bakersfield, "cut crude
processing in July, by nearly 10%, a reduction attributed to
planned heavy maintenance."


It's always a good idea, I suppose, to schedule heavy maintenance
work during times of peak energy demand. That's the kind of
intelligent business decision we would expect from a corporate
giant with decades of experience in the energy business.

On July 8, the LA Times, armed with yet more internal company
documents and an unnamed company whistleblower, revisited the story
of the Bakersfield refinery. As of July 1, it was discovered, Shell
had "reduced crude oil processing at the refinery to levels 19%
below capacity" -- more than triple the unexplained reduction that
had been planned for the facility.
(Elizabeth Douglas "FTC Probing Shell's Plan to Shut Refinery," Los
Angeles Times, July 8, 2004)


According to both company documents and the unnamed employee,
"there were no problems with the plant's equipment," and no other
explanation was offered for the radical reduction in processing --
undoubtedly because there is no legitimate reason for the decreased
output. So obvious is the company's intent to artificially tighten
gasoline and diesel supplies that the FTC was obliged, for the sake
of appearances, to step in and pretend to launch an investigation.
Shell's response to the investigation has been to delay the closing
of the refinery for a few months while it goes through the motions
of pretending to find a buyer.


In completely unrelated news, a July 31 LA Times report announced
that "profit at ChevronTexaco Corp. more than doubled during the
second quarter ... echo the strong quarterly results reported
by other major U.S. oil refiners this week." ChevronTexaco's profit
jumped from $1.6 billion to $4.1 billion. Not too shabby. Three
days later, the Times reported that Unocal's earnings for that same
quarter had nearly doubled, from $177 million to $341 million.
(Debora Vrana "Chevron Profit Soars," Los Angeles Times, July 31,
2004, and Julie Tamaki "Unocal's Earnings Nearly Double," Los
Angeles Times, August 3, 2004)


Nobody should conclude from any of this, of course, that inflated
fuel prices are attributable to rampant greed and the quest for
obscene profits. No, clearly rising fuel prices are a sign of 'Peak
Oil.' Just ask Mike Ruppert and Mark Robinowitz. Or better yet,
bypass the flunkies and go directly to the scriptwriters at
Halliburton and the Club of Rome.

full rePort @ http://www.davesweb.cnchost.com/nwsltr64.html


* * * * * * * * * *
PROGRAMMING FAILING DUE TO IGNOMINIOUS SATURATION, in a free-thinking Nation:
---------------------------------------------------------------------------
shiLLs ToiL in scam for RoyaLs
'Peak OiL'
Mind SoiLed
Atmosphere BoiLs
KundaLini CoiLs
FOIL Peak OiL by Being Peace LoyaL
'all cards on the tabLe'
According to HoyLe.
~~~

shame! misguided folk waging info and economic wars on their own people ,and who has keys to the bunkers?

[hunter]

12. Shell's refinery in Martinez was shut down for awhile...

... claiming "mechanical problem"

The Tesoro refinery in Martinez burned out its cat-cracker.

Bullshit showers everywhere...

My guess is the big players are positioning themselves for an expansion of Alaskan oil production.

One way or another they are going to bleed the money for that expansion out of all of us.

[Igel]

17. But, of course, the refinery was sold and at last word was

still operating.

I also note a regrettable lack of reasons given by the company: instead of asking the questions, examining the answers, and then figuring out if the answers make sense before proposing its own and defending them, the article asks the questions, assumes no answers are possible, and substitutes its own.

[A HERETIC I AM]

11. I wish i could find a link for the following, but here is an explanation

1st) No new refineries have been built in this country for decades largely due to the environmental laws now in effect. The refiners (Often different companies than the oil giants) won't build them because of the high cost.

2nd) The "NIMBY" and "BANANA" arguments. (Not In My Back Yard and "Build Absolutely Nothing Anywhere Near Anything") Refineries do smell so most zoning laws prohibit their being built anywhere near residential areas. Logistics demand they be near pipelines (Both incoming crude and outgoing fuels) to be useful. You just simply can't truck in and out all that product.

3rd) Over-capacity is expensive. This is the most infuriating. They won't build more because if they did, it would increase the retail supply, forcing prices down (Perhaps to or below costs) reducing the extraordinary profits they are/have been making for years. There is comparatively little surplus storage capacity for finished product in this country so if demand slumped, you would have to shut down the refinery and that gets expensive.

Heard all that in an interview 18 months ago during the California crisis. That crisis BTW was instigated when a refinery in SoCal was shut down for an extended period for maintenance and product grade change. It caused a shortage (But not so severe that deliveries to stations were interrupted. Imagine that!) and a resulting price increase in the state that snowballed.

[hunter]

13. Your 1st) and 2nd) are false.

Building a clean efficient refinery is not an impossible task. But why would you want to do that when you own the Federal Government? Controlling pollution cuts into profits.

The Bush Administration want to turn the entire nation into a Texas free-for-all where anti-pollution measures are "voluntary."

[A HERETIC I AM]

14. I didnt say building them was "An impossible task"

I said they werent being built due to the high cost. At least that is the explanation given.

How is my #2 false? It is true, as another poster suggests, that most communities fight tooth and nail against allowing such facilities to be located near residential areas.

I should make it clear that i am merely reporting a conversation i heard quite some time ago so i don't necessarily agree with the mans arguments, just offer them as an explanation.

[hunter]

15. Pollution control and safety are very legitimate costs of doing business.

The oil companies act as if these are unjustified burdens.

Communities would be much more open to the expansion of existing refining capacity if the oil companies didn't have such a long history of unethical, and sometimes criminal, behavior.

If an oil company was able to say to a community, "Look, we would like to increase the capacity of this refinery, and at the same time we are going to cut pollution 90%, increase worker safety, and reduce the public risk," and then if they could be counted on to keep their promises, I expect much of the NIMBY problem would simply go away.

Instead the oil companies want to run things In California like they do in Texas or Louisiana where they can, through their own negligence, blow up refineries, kill workers, and poison their neighbors while facing no worse consequences than "fines" they pay out of petty cash.

[A HERETIC I AM]

20. Hunter, I don't think you and i are that far apart here......

I agree with the statement regarding legitimate costs of doing business but that seems to beg the question "Why should they do ANYTHING different if they don't have to?" They have been forced over the years to increase safety, environmental as well as worker, to a certain degree but we still see accidents and spills and you are right, they pay those costs out of petty cash.

I agree that it is all about the money. Most everything in business is, to be sure.

The most interesting thing i learned from that interview i heard (If memory serves, it was an Oil Co. Executive so yes, i take it with a large grain of salt) was the over-capacity issue. They want to avoid having more production capacity than necessary at all costs because refineries, either new or expanded, represent an enormous capital investment and as i stated before, there isn't really anywhere to store extra gasoline, diesel and kerosene. Those large tanks we are all familiar with at processing facilities get filled and emptied constantly as the amount of fuel this country uses is ENORMOUS. On the order of a BILLION gallons every couple days.
I would venture that it is safe to say the gasoline in the tank of your car was probably crude oil less than a month ago, if that.

[Strelnikov_]

19. My Reading Is That It Is No. 3. Follow The Money

Overall, an excellent summary as I understand the issue.

As Hunter points out, 1) and 2) are simply costs of doing business. And regarding 2), my understanding is that additional capacity can be provided by expanding existing refineries, vs. new sites, it just may cost more.

As others have pointed out, why not scream about 1) and 2) if you are an oil company to make a justification for public subsidies.

Also, why would oil companies build expensive, low margin refineries when they can just sit back and make a fortune on the oil in the ground. You have made an excellent case in 3) as to why the independent refiners are reluctant to build additional capacity.

On Edit: The current situation displays the failure of depending on the free market system for energy infrastructure planning. The petroleum market has basically structured itself to maximize profits, at the expense of a redundant, stable system. Once the market signals a problem (refinery capacity in this case), the reaction time is too long to mitigate the energy shortages that develop.