Experts say oil refineries stretched too thin

[LSK]

WASHINGTON — Record gasoline prices have exposed the shortcomings of the aging U.S. refining system, but there are no quick fixes, a panel of energy experts told lawmakers Tuesday.

snip

Testifying on a day when the U.S. average gasoline price broke a record, not adjusted for inflation, for a third-consecutive day, experts from government and private sectors said refineries are stretched thin, helping to boost prices. There have been a number of refinery shutdowns, both planned and unplanned, in recent months.

snip

Building refineries, factories that turn crude oil into gasoline, takes years and costs billions of dollars. Sankey noted oil companies were losing money as recently as 2002, providing a disincentive for investments.

Plus, there's a shortage of energy workers, prices are high for raw materials for building, such as steel, and local opposition is often strong. The push for alternative fuels, such as ethanol, is leading firms to question whether gas demand will still be there by the time they get a refinery up and running, Sankey said.

http://www.usatoday.com/money/industries/energy/2007-05-15-gas-hearing-usat_N.htm

The hearing can be viewed online here:

http://energy.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=1630

[ItNerd4life]

1. A few problems with their analysis

Yes, their is a shortage of refineries and they do cost alot to build. But off shore wells cost a lot to build and they are still building them and they take years to build.

It's called, the oil companies want to control the amount of gas being manufactured so they can keep the prices artifically high.

I wish our leaders would call them on it and actually do something about it instead of grand standing and doing nothing.

[LSK]

3. that is an excellent point

[RaleighNCDUer]

7. Yep. If, when they've finished building the new refinery, the demand

has disappeared (highly unlikely) what you do is close the OLD, less efficient refinery. Depending on obsolete facilites has to cost more than a modern one. The cost of closing the old one would be a tax write-off in any case.

They're just making up excuses to jack up prices.

[Lobster Martini]

2. More like foresight has been stretched too thin...

I think it was a Shell exec who was interviewed a few days ago and said that--I'm paraphrasing, with as much sarcasm as I can muster--that his company's goal is to increase its output of alternative fuels over a decade to a percentage that will make practically no difference whatsoever.

Thank you Dick Cheney for your prescient energy task force.

[Rosemary2205]

4. I used to agree with that but DU educated me otherwise.

We already import refined gasoline and the refineries where we import gas are nowhere close to capacity. In other words, if big oil really wanted to meet the US demand they COULD acquire enough supply, no problem.

My apologies for not saving all the links. Hopefully DUers will post them again. After just a few days of reading, it was painfully obvious big oil is pulling an Enron and manipulating the supply for profits.


And this business about big oil thinking ethanol is going to put them out of business? Geesh even a dummy like me knows we can't grow THAT much corn! Not to mention how volatile ethanol is. -- the BEST estimate I've seen (if my memory serves me) -- the BEST -- and that is from the corn lobby -- is that ethanol can possibly replace up to 8% of our overall energy requirements. -- Someone correct me if I'm wrong.

[KansDem]

39. My wife's dad was a farmer and my wife grew up on a farm...

There's one thing she's said recently that's stuck with me..."crop rotation." Apparently, if farmers don't rotate crops, pathogens and pests associated with that one crop tend to build up. Also, one crop planted season after season tends to deplete the earth of certain nutrients. So, in the past farmers have had to replace these nutrients and combat these pests and pathogens with chemical-based alternatives which, as we know, tend to pollute the ground water and run off into streams and rivers, creating more problems.

So I'm a little skeptical that crop-based fuel will be the cure-all for importing fossil fuels. I tend to think we shouldn't pit the "crops for fuel" people against the "crops for food" people. Call me paranoid, but I tend to believe this move to ethanol, at the expense of truly renewable energy sources, is a ruse backed by the fossil-fuels industries who know it will fail.

[Virginia Dare]

5. We've had years and billions of dollars..

so what's the problem, it's almost as if what's lacking is the motivation? :banghead:

[Deja Q]

16. Greed and indolence. The very thing the middle class is currently being blamed for.

:D

[Initech]

6. It's not in their best interest (profit) to build refineries.

I still cannot believe that the Democratic Congress is doing nothing to stop these refineries from being shut down to drive up gas prices. As a CA motorist who relies heavily on his car, this is pissing me off big time. :grr:

[dogday]

8. Let me give the oil companies some free advice

1. Don't treat your employees like you do your customers... You have the money, hire the man-power you bunch of cheap asses...

2. And this is the one you really want to pay heed....

Instead of gas shortages and high prices every spring, and summer till labor day, perhaps you can increase production every single month, and stockpile those reserves for times like this when it is needed more(so you say). No high prices, No gas shortage... But yes you would not get to screw us royally for our hard earned bucks....

I am not even going to charge you for this much needed info....

[pampango]

9. I have heard that refineries are environmental nightmares.

That is one of the reasons that none have been built in many years. No one wants them in their back yard.

[LSK]

11. that is a republican talking point which I find hard to believe

America is a huge country, theres plenty of space to put one away from someones neighborhood.

[pampango]

14. I'll take you word on it being a RW TP, but is it true?

It seems to me that they would have to be located on the coast to have access to shipments of crude oil and have access to road and/or rail transport to ship the finished products.

Most places that meet those requirements are probably near cities, but there may be places where you won't get the "not in my back yard" response to the building of a new refinery.

[LSK]

23. it probably is somewhat true

But we have the oil guys in the White House. We just did a whole war for oil, but we cant get a refinery built???

Im sure that environmental regulations drive up the cost, but they sure as hell had a lot of profits to pay for it in the past few years.

[Deja Q]

19. Cars can be environmental nightmares too.

We've seen some cities start and slowly expand light rail projects. What's oging on will encourage further use of these solid, reliable, useful forms of transport.

[Deja Q]

18. Also true. The plus side is, this will

encourage alternative fuels and methods of propulsion.

Again, we will always need oil. But electric and hybrid forms of transport will become more popular.

Win-win.

Maybe it's a short-term pain for longer-term good? (Again, perspective.)

[Sapere aude]

34. We have one practically on the beach here in Goviota, CA It was even hit by a Japanese sub in WWII.

Not a nightmare at all.

[CabalPowered]

10. Well maybe they shouldn't have closed so many

after the consolidations of the late 90's/early 2000... :eyes:

edit, emot fix

[conscious evolution]

21. 30+ refineries across the US

if I remember correctly.Its been a while since I have read up on the subject so my memory is a little hazy.
The big companies also drove the prices for oil down in the 90's to put the squeeze on the smaller independantly owned refineries.Many could not compete and either shutdown or sold out.

Big oil=organized crime IMO.

[gravity]

37. Big oil driving down the price of oil?

That just doesn't make sense

[conscious evolution]

45. They think and plan with a long view. nt

[LSK]

12. meanwhile the Saudis are building refineries

http://archive.gulfnews.com/articles/07/04/25/10120550.html

[Deja Q]

17. Maybe America really is being abandoned?

I doubt it; otherwise make a NAFTA special highway, amongst other things that fly in the face of such talk?

Still, it's terribly amusing to put the imagination in overdrive.

[leftofthedial]

13. the only thing stretched thin

is the oil industry's trumped-up rationale for their latest round of gouging

[Deja Q]

15. Holy enronomics, batman...

The only thing clear is this: Offshoring has led to the problem of 'qualified' workers.

And given the sheer amounts of money these oil cats make, why can't they spend a little now - which they'd recover quite quickly.

The repub debate on FOX; everyone was blabbing about increasing oil supply. And that means refineries as much as crude availability. Right now it's not a shortage. It's a lack of processing power.

And even with other fuels, we still will need oil. It's a win-win for the oil cats, period.

[GreenPartyVoter]

42. I had no idea they were losing money

Sounds like crazy talk to me, the way they all skewer us.

[jdiggity]

20. Quick question

Isn't this a good thing? Our goal is to switch to alternatives, so one would think that any incentives people have to turn to alternatives would be a plus in our favor. I would think that the higher gas goes up, the larger the incentive would be, and thus the faster we can turn this economy around. Environmentally friendly alternatives are the end-goal, and last i checked, we don't have much time before it will be too late to act on GW.

I think our desire to keep corporations from gaining a profit is trumping our desire to save the planet in this case. Or am I missing something?

[LSK]

25. yes and no

I agree that higher gas prices will drive us to alternatives faster and drive more Hummers off the road. However, a lot of poor people are being hurt by all of this.

If we were going to have higher gas prices, I'd rather it being from taxes that then can fund universal healthcare or something that comes back and benefits us all instead of a select few oilmen.

[gravity]

27. That's the whole problem of tackling global warming in a nutshell

If we use less energy, the cost of living is going to increase for all of us and the economy will be negatively impacted.

You basically have to make a trade off between todays standard of living and tomorrows climate.

[charlie]

28. Not only that

But president bubblehead's sop to ConAgra and ADM, making corn ethanol a centerpiece of his "energy independence" policies, hits the poor (and the muddling middle) in their grocery bills too, a double whammy.

[gravity]

30. It benefits the farmers

Although I think it's a horrible policy

[charlie]

36. If you're talking about

the dwindling pool of independent farmers, yeah higher prices of whatever they're selling helps, sure. But the policies weren't created for them.

Right now, there's a swelling real estate bubble worldwide that's looking ominously like our housing market, all because of the anticipated gold rush in US corn purchases. If a family farmer owns his land outright, he's good to go (if he's in a state without onerous property taxes). If not, he's boned.

Another side effect is the inflation of the prices of other farmed goods, as corn crowds everything else into smaller, pricier parcels.

[LSK]

31. now if the gas prices went up from taxes and that money helped the poor

But there I go again pretending we were in a modern European country.

:grr:

[Malidictus Maximus]

29. Yep

The only thing that will get most people out of their cars is gas that is *MUCH* more expensive than it is now. As someone who either carpools or rides a motorcycle 7 miles each way to work I am not going to worry until it is over the $10 a gallon mark. Once it gets above five bucks a gallon then people will start to put political pressure on their representatives to get going with busses, rail and bike paths- until then it's only whining (or worrying about the effect on the economy, but transitions are never easy and disproportionately hurt the poor- always have since the dawn of history).

[A wise Man]

22. Yeah and I'd like to sale anyone that believes

that "BS" the state og georgia real cheep.

[charlie]

24. Some of our oil-soaked congress critters had a hand in that

over the decades with perks like the oil depletion allowance and intangible drilling costs, that made exploration and extraction far more profitable than refining.

[LSK]

26. now who James would you be Inhofe would you be talking about?

:D

[Sapere aude]

32. Why do they never have a story that goes, OMG something great happened and prices are going down?

Never is there one of those

[gravity]

33. High gas prices should increase incentives for oil companies to build refineries

but if this article is correct, it could take years before they would be built.

[Sapere aude]

35. Only in a market where there is competition.

The old supply and demand curve where demand goes up so supply goes up to equilibrium requires many suppliers. With one supplier the demand goes up the supply remains level (on purpose) and the price goes up.

[gravity]

38. Why is there always 3 gas stations on one street corner?

There is still many gas companies in this country who would profit individually if they built more refineries.

[Sapere aude]

40. The gas stations don't control any of this. The oil companies own them.

It is a vertical monopoly. They own the drilling, processing and distribution.

[charlie]

43. True

Though there are still a lot of franchisees they don't own, they soon will, since the oilcos have put them in the untenable position of paying for the privelege of selling their gas and making up the difference with beer, sodas, cigarettes, and peanuts.

[Orsino]

41. Since Big Oil won't keep the refineries open...

...nationalize 'em. Secures our energy needs in the short term, and actually creates jobs.

[BlackVelvet04]

44. Lest we forget.....

the lack of refineries is an intentional, longterm plan.

NEWS RELEASE
September 7, 2005

CONTACT: Jamie Court [phone] ext 327 or Tim Hamilton [phone]
Internal Memos Show Oil Companies Intentionally Limited Refining Capacity To Drive Up Gasoline Prices

Santa Monica, CA -- The Foundation for Taxpayer and Consumer Rights (FTCR) today exposed internal oil company memos that show how the industry intentionally reduced domestic refining capacity to drive up profits. The exposure comes in the wake of Hurricane Katrina as the oil industry blames environmental regulation for limiting number of U.S. refineries.

The three internal memos from Mobil, Chevron, and Texaco (Click here to read the memos: http://www.consumerwatchdog.org/energy/fs/.) show different ways the oil giants closed down refining capacity and drove independent refiners out of business. The confidential memos demonstrate a nationwide effort by American Petroleum Institute, the lobbying and research arm of the oil industry, to encourage the major refiners to close their refineries in the mid-1990s in order to raise the price at the pump.
http://www.consumerwatchdog.org/energy/pr/?postId=5110&pageTitle=Internal%20Memos%20Show%20Oil%20Companies%20Intentionally%20Limited%20Refining%20Capacity%20To%20Drive%20Up%20Gasoline%20Prices