Oil refinery woes

Why no new oil refineries when we need them? Why no buyer of the east coast refinery?

http://www.reuters.com/article/2012/03/16/us-usa-spr-capacity-idUSBRE82F05Q20120316

Is this a conspiracy of existing refineries to screw over Americans with price fixing? Is this the classic reduce production to raise prices scheme?

Got dem oil refinery blues.

Originally posted by Metal Brain
Why no new oil refineries when we need them? Why no buyer of the east coast refinery?

http://www.reuters.com/article/2012/03/16/us-usa-spr-capacity-idUSBRE82F05Q20120316

Is this a conspiracy of existing refineries to screw over Americans with price fixing? Is this the classic reduce production to raise prices scheme?

Three ?'s ... and I don't understand a single one of them. Please elaborate.

Originally posted by Kegge
Three ?'s ... and I don't understand a single one of them. Please elaborate.

Are the oil refineries engaging in price fixing which violate anti-trust laws?

Originally posted by Metal Brain
Why no new oil refineries when we need them? Why no buyer of the east coast refinery?

http://www.reuters.com/article/2012/03/16/us-usa-spr-capacity-idUSBRE82F05Q20120316

Is this a conspiracy of existing refineries to screw over Americans with price fixing? Is this the classic reduce production to raise prices scheme?

Want I want to see is continued nonaction so that we will see $10 gas in the near future. That way maybe I can see one of Obama's algae burning cars come out for sale. I figure I can then have free fuel till the end of time with the pond out back!!

Originally posted by Metal Brain
Are the oil refineries engaging in price fixing which violate anti-trust laws?

Price fixing is just capitalism. Anti-trust laws are unnecessary government regulations. Each state should set their own rules.

Originally posted by whodey
Want I want to see is continued nonaction so that we will see $10 gas in the near future. That way maybe I can see one of Obama's algae burning cars come out for sale. I figure I can then have free fuel till the end of time with the pond out back!!

The price at the pump is approximately $10/gallon here. The world keeps turning.

Originally posted by KazetNagorra
The price at the pump is approximately $10/gallon here. The world keeps turning.

Regardless of what happens elsewhere, there would be drastic consequences in the US economy if gas was $10/ gallon here.

Originally posted by KazetNagorra
The price at the pump is approximately $10/gallon here. The world keeps turning.

On the other hand it only takes a liter of petrol to circumnavigate the Netherlands.



(I jest of course...)

Originally posted by Metal Brain
Why no new oil refineries when we need them? Why no buyer of the east coast refinery?

http://www.reuters.com/article/2012/03/16/us-usa-spr-capacity-idUSBRE82F05Q20120316

Is this a conspiracy of existing refineries to screw over Americans with price fixing? Is this the classic reduce production to raise prices scheme?

I am glad to see you apparently support and recognize the benefit of the federal government having anti-trust laws. The federal government ain't all bad and has useful roles.

As a chemical engineer who grew up in the petrochemical business along the Gulf Coast in Texas and Louisiana, I can tell you the government watches companies like a hawk for any price fixing or any price collaboration. And the government is good and sophisticated at watching. We always made sure to very visibly and publicly announce our price increases before ever even coming close to discussing privately such with a competitor.

As for a new refinery, it is so massively capital intensive to build one. That is a reason there so many old refineries in operation. As for the ones in operation, they are antiquated and in dire need of maintenance, and not usually an attractive purchase, even with the potentially high returns.

As for pipelines, most were built during WWII or right after WWII, and are also becoming old and maintenance headaches. Further, API and OSHA regulations (which are definitely needed to help prevent leaks, explosions, deaths, etc.) require so much expensive mechanical integrity testing on pipelines.

Originally posted by moon1969
I am glad to see you apparently support and recognize the benefit of the federal government having anti-trust laws. The federal government ain't all bad and has useful roles.

As a chemical engineer who grew up in the petrochemical business along the Gulf Coast in Texas and Louisiana, I can tell you the government watches companies like a hawk for any pr ...[text shortened]... explosions, deaths, etc.) require so much expensive mechanical integrity testing on pipelines.

I do see the need for anti-trust laws, but I doubt they are being enforced as you believe they are. Your statement that refineries are not an attractive purchase despite potentially high returns is a bit contradictory. If maintenance is so expensive it is not worth owning why do they expect to sell them to anybody? Perhaps they are asking too high of a price. Do they want to lose money by asking too much?

There is no profit in owning a refinery that produces nothing unless price fixing is going on.

Originally posted by Metal Brain
I do see the need for anti-trust laws, but I doubt they are being enforced as you believe they are. Your statement that refineries are not an attractive purchase despite potentially high returns is a bit contradictory. If maintenance is so expensive it is not worth owning why do they expect to sell them to anybody? Perhaps they are asking too high of a p ...[text shortened]...
There is no profit in owning a refinery that produces nothing unless price fixing is going on.

It is usually better economics to keep running the typically old refinery (with barebones maintenance) than it is to outright sell it or to shut it down (which costs).

As for any alleged price fixing, domestic production and refining doesn't have much impact. Sure, a startingly domestic interruption could give the psychological price spike, but really not a lot of impact in equilibrium. Too many other big contributors: Canada, Mexico, China, North Sea, and OPEC (primarily Middle East, Venezuela, and Africa), for US domestic production and refining to have controlling influence.

Originally posted by moon1969
It is usually better economics to keep running the typically old refinery (with barebones maintenance) than it is to outright sell it or to shut it down (which costs).

As for any alleged price fixing, domestic production and refining doesn't have much impact. Sure, a startingly domestic interruption could give the psychological price spike, but really n ...[text shortened]... Venezuela, and Africa), for US domestic production and refining to have controlling influence.

Apparently you didn't read the news article I posted at the start of this thread. Here is an excerpt of the news article near the end of it.
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But the East Coast looks a less likely market this year. Sunoco is set to close its 335,000 bpd Philadelphia refinery before June if it does not find a buyer. That could cut the region's capacity to less than 700,000 bpd.

Originally posted by Metal Brain
Apparently you didn't read the news article I posted at the start of this thread. Here is an excerpt of the news article near the end of it.
--------------------------------------------------------------------------------------------
But the East Coast looks a less likely market this year. Sunoco is set to close its 335,000 bpd Philadelphia refinery be ...[text shortened]... ne if it does not find a buyer. That could cut the region's capacity to less than 700,000 bpd.

I did read the article. At some point, it can be a legitimate decision to shut down a refinery. I bet that Philadelphia refinery is ancient with parts from as early as the 1930s. Moreover, you would not want to sell a refinery for less than its salvage value, especially if the costs to shut down the plant (safely decommission the equipment) and address any environmental liability (i.e., buried wastes, etc.) are not too much.

Lastly, the shutdown of a few US refineries will not have much impact on pricing especially over the medium term.

Originally posted by moon1969
I did read the article. At some point, it can be a legitimate decision to shut down a refinery. I bet that Philadelphia refinery is ancient with parts from as early as the 1930s. Moreover, you would not want to sell a refinery for less than its salvage value, especially if the costs to shut down the plant (safely decommission the equipment) and address a ...[text shortened]... own of a few US refineries will not have much impact on pricing especially over the medium term.

It is not going to help.

http://www.dol.gov/opa/media/press/eta/ETA20120554.htm