Why doesn't the US build more refineries?
I heard this on Rush Limbaugh today. They played a clip from an interview on some news station. A guy that was in charge of some refineries here in the U.S. was being asked if they were to blame for the high gas prices.
He said you could say they are but not for why we would think. He said we haven't built an oil refinery here in this country since the 70s!
He said to build a new refinery in this country would take somebody with extreme wealth willing to take a 10 billion dollar, 10 year investment gamble. The approximate amount of time it would take to break even on the project.
In the climate we live in today, there would be so many hurdles to over-come, namely the enviromentalists, federal, state, county, and local authorities and laws, fights from the locals, the permit process and on and on........that by the time ground was finally broken and the thing was built, it would take roughly 20 years start to finish to get a new refinery up and running.
He went on to say that beyond crude oil, we have to import 12% of our GASOLINE! "That number is likely to increase."
Refineries over-seas are not all capable of producing the different grades of fuels that all of our different cities require. They are also less efficient. They have to get incentives to produce what we need before we can import it.
He said our existing refineries have been modified and slightly upgraded over the years in order to work at maximum efficiency and capacity but it isn't enough.
Basically, it looks like we will continue to import more foreign gasoline because it's far easier to do than build another refinery.
Which means it is more costly to get them to make it properly, and more costly to have it shipped over here, but there are no other options right now.
He said you could say they are but not for why we would think. He said we haven't built an oil refinery here in this country since the 70s!
He said to build a new refinery in this country would take somebody with extreme wealth willing to take a 10 billion dollar, 10 year investment gamble. The approximate amount of time it would take to break even on the project.
In the climate we live in today, there would be so many hurdles to over-come, namely the enviromentalists, federal, state, county, and local authorities and laws, fights from the locals, the permit process and on and on........that by the time ground was finally broken and the thing was built, it would take roughly 20 years start to finish to get a new refinery up and running.
He went on to say that beyond crude oil, we have to import 12% of our GASOLINE! "That number is likely to increase."
Refineries over-seas are not all capable of producing the different grades of fuels that all of our different cities require. They are also less efficient. They have to get incentives to produce what we need before we can import it.
He said our existing refineries have been modified and slightly upgraded over the years in order to work at maximum efficiency and capacity but it isn't enough.
Basically, it looks like we will continue to import more foreign gasoline because it's far easier to do than build another refinery.
Which means it is more costly to get them to make it properly, and more costly to have it shipped over here, but there are no other options right now.
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thats cause the greenies have a fit even if they try to upgrade a refinery with more efficent machines. 0 -
NIMBY effect. 0 -
Yeah but the current refineries have all increased capacity every few years. 0 -
bottom line they dont want to spend 1/3 of the 30 billion dollars that they just made in the first quarter of 2007. 0 -
quote:Originally posted by Odawgp
bottom line they dont want to spend 1/3 of the 30 billion dollars that they just made in the first quarter of 2007.
Stop and think for a moment. If owning a refinery is so profitable, the oil companies would be ecstatic at the chance to invest in even more capacity to produce the fuel themselves that they wish to sell. They could make even larger profits refining that oil instead of buying gasoline from overseas.
Oil companies love to invest in profitable ventures and there is little to no advantage for them to just sit on large stockpiles of cash. You just can't make high enough profits off of raw cash. A little bit of reality is not a bad thing to consider.0 -
What he didn't say was that we export 70% of our own oil to eastern Asia. 0 -
quote:Originally posted by scrumpyjack
What he didn't say was that we export 70% of our own oil to eastern Asia.
Really? Show me a credible source, and then I'll post several for you that totally refute that statement.
Try this chart for a starter. You're not even in the ballpark with that statement. In fact, you're not even in the right league, probably not the correct sport.
http://tonto.eia.doe.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_w.htm
I'll toss in this piece for right now.
"Just 4 percent of North Slope oil trickled to Asia between 1996 and 2000, before the flow shut off almost entirely. Since then, the only export was a single tanker in 2004, which delivered a load of oil to China en route to getting repaired at an Asian port."
That's just North Shore, but it's some of what was once going to Asia, and it isn't anymore.
Here's the source.
http://seattletimes.nwsource.com/html/localnews/2002245699_export17m.html?syndication=rss
What oil did move was because it flooded that capacity of West Coast refineries, and it was cheaper to do something like sell oil to China from the West Coast and buy North Sea oil for the East Coast. It simply cost less for the transportation and amounted to a simple left pocket, right pocket movement of money. It's good business, not a conspiracy, and you get cheaper fuel.0 -
Dlrjj,
I think the Big Oil companies are really multi nationals these days. I certainly don't have the economic acumen that you do but I sure think these guys have an International monopoly on the most in demand product in the World, and are past masters in working that monopoly to the maximum profitability. I watched an industry analyst say that none of the Oil Copmpanies wanted to put billions into a refineries that would take 10-20 years to turn good profit. BS, I don't buy that. First, looking at the incredible profits they've reaped in recent years(I'm green with envy), I suspect it wouldn't take that long, and second, many industries sink billions into projects that have 20 year and longer projections. I know the Auto Industry does this regularly. The guy that owns the dealerships that I semi retired from is going to spend @ 10 million for a new up to date facility and this is just a car agency. It's going to take some years to clear that. The giant oil interests could build refineries out of their spare change. My opinion is that the shortage of refineries in the U.S. somehow works to their advantage in controling prices, thus somehow maximizing profits. These guys are nobodys fools, and don't make mistakes. I think I recognize when I'm being hoodwinked. This has definitely contributed to inflation. Everything gets there by fuel powered transportation, MANY of the things in our lives are derived from petroleum. The dealership I retired from has 36 parts trucks on the road 6 days a week. We do 17-18 million gross sales per year in a highly competitive market. We have HAD to pass the extra expense of fuel on to the customers. I assume every business has had to do the same. The result HAS to be inflated prices.0 -
If we had more refineries how could they hike the gas price everytime one shuts down for routine maint.? We could then keep up with demand where is the profit in that? 0 -
It's all BS. Gas prices have never "crept" up like you would expect if we were steadily outpacing the supply. It jumps in 20-40 cent incriments.
Now, when W and his pals had the opportunity last summer or thereabouts to take testimony from big oil at congressional hearings, guess what? ONLY IF IT WASN'T UNDER OATH! I don't know why someone just didn't say "Forget it. Why waste the time"....0 -
Dak,
It's not the build time for the plants, it's the approval time and cost. The companies have actually expanded their current facilities enormously because it's much easier and cheaper to upgrade and expand what they already have than it is to start from scratch with the kinds of studies and permits it takes from organizations like the EPA, etc. It's very similar to the problem in getting new nuke plants started, although that got shut down completely.
The problem is that they simply can't keep up with the expansion in demand. Do a search for the increase in the number of cars, light trucks, and bikes in the last ten years and the problem becomes obvious. You and I are old enough to remember when most families only had one car, but the current figure is 1.9 per household (we're running five), and that sucks up fuel big-time.
We are supposed to have an ethanol plant going up just a few miles from my house and it would provide some badly needed jobs in the area and increase the market value of local farm crops, but the facility is being resisted at every step on environmental and health charges and it's very possible the investors are just going to give up and forget the idea. NIMBY strikes again.
You're absolutely right that some industries deal with 20 year factors, but not many would do that, and there's going to have to be a serious return percentage at the end. If you use the "Rule of 72" for an evaluation mechanism, you'd find that a 20 year return, divided into 72 yields a paltry 3.6%, and you can do better than that in a CD in the bank. That's not going to happen, so there has to be a higher projected payout. No oil company is going to take less than at least an 8% return, and I doubt that they would consider much below at least 10% right now, 15% would not be out of line for their expectations, and even higher could be targeted.
Using the "72" factor again, that means no more than a 9 year payback, likely no more than about 7+, and possibly as little as 5 or 6 in the current market. I don't really have hard figures on these last items, so they are strictly speculation on my part, but it's speculation that is based on attainable and known expected returns.
It would take several years to build a plant once approval was obtained, and the net return for all of those years is a complete negative until the facility is up and running. Not just a loss, but a complete payout with not one dime of revenue until the product starts coming out of the lines. That's some pretty serious negative numbers that would have piled up after a few years, and it has to be recovered in the price of the product sold when it is finally produced.
BTW, your economic acumen is just fine. I've worked with you in the past, and you know what you are talking about, and don't pretend when you don't. I've never seen you BS what you don't know. That's a sure sign of a person who understands what they are dealing with and has the intelligence on occasion to say "I don't know, but I'll find out".[:)]0 -
quote:Originally posted by Jgreen
It's all BS. Gas prices have never "crept" up like you would expect if we were steadily outpacing the supply. It jumps in 20-40 cent incriments.
Now, when W and his pals had the opportunity last summer or thereabouts to take testimony from big oil at congressional hearings, guess what? ONLY IF IT WASN'T UNDER OATH! I don't know why someone just didn't say "Forget it. Why waste the time"....
Watch crop prices sometime and see how many cents they can jump in one day. It's interesting to watch how much the can jump around from hour to hour during just one day.
Commodities just flat out operate in that manner, and fuel is a commodity.[:)]0 -
Here is California there are currently about two dozen refineries but only 14 or 15 produce motor fuels, with the largest being the BP refinery in Carson running at about 260,000 barrels per day, which is under half the production of a large Gulf Coast refinery like Exxon's Baytown refinery. Building a new refinery in a major urban here in CA would be enormously expensive and nearly impossible due to enviromental issues, as well as NIMBY and one of the major draws for oil companies buying each other out was in order to get their hands on another companies existing refineries. The old Union Oil refinery in Wilmington where I used to work in the late 70's and early 1980s is now owned by Conoco-Phillips and currently refines around 135,000 barrels of crude per day. Back when I was a young engineer at that refinery it's production ran at a bit over 110,000 bpd so there has been an increase in production of something like 20% over the past 20 odd years, or a 1% increase in production per year. That sounds great but the problem is that our consumption of refined motor fuels was increasing at better that 2% during that same time period so refining capacity has lagged behind demand...And it caught up with us a couple of years ago. Another issue often ingnored by those not in the industry is that California supplies nearly all motor fuels to the State of Nevada as well as approx. 60% of the motor fuels used in Arizona becasue neither of those states have refineries inside their borders. 30+ years ago this was not a concern but over the past 20 years both Nevada and Arizona saw huge population growth, and a resulting thirst for motor fuels which put additional strain on California refineries. Reformulated gasolines used in this state are more time consuming and costly to produce and old refineries need much more maintenance and are often out of service for extended periods. These are mostly things that we have all heard before and of course no one believes any of it since it is far more comforting to imagine a world wide plot by OPEC, Islamic fanatics, the military industrial complex or wealthy guys like dlrjj as being behind the fast climbing price of motor fuels. 0 -
you have no grasp of economic reality.
thats fine, but you might want to keep it to yourself
quote:Originally posted by Odawgp
bottom line they dont want to spend 1/3 of the 30 billion dollars that they just made in the first quarter of 2007.0 -
quote:Originally posted by tsavo303
you have no grasp of economic reality.
thats fine, but you might want to keep it to yourself
quote:Originally posted by Odawgp
bottom line they dont want to spend 1/3 of the 30 billion dollars that they just made in the first quarter of 2007.
People like that NEVER keep it to themselves. It is an absolute requirement for those who have no idea of the subject to expound on it to the greatest extent possible, and refer to those who do understand it as "sheeple" and apologists.
Reality is not a concern for them at any level. The only thing that counts is emotion, and they can't see just how close that puts them to Rosie O'D.
You, on the other hand, have some really serious potential and I'm damned pleased to see another Econ major around here.0 -
Well, I'm definately not an econ major but certainly appreciate the replies. Very informative. I just found the story interesting and was curious to see if we could find the bottom line here. As in, is it BS excuses or is it really not feasible.
dlrjj seems to have made a pretty good point. No matter how much money the rich have, they are not going to waste time in ventures that will lose them money. Life is too short and if there are other viable options to increase their wealth faster and in the short term, that's the route they will go.0 -
quote:Originally posted by vess1
Well, I'm definately not an econ major but certainly appreciate the replies. Very informative. I just found the story interesting and was curious to see if we could find the bottom line here. As in, is it BS excuses or is it really not feasible.
dlrjj seems to have made a pretty good point. No matter how much money the rich have, they are not going to waste time in ventures that will lose them money. Life is too short and if there are other viable options to increase their wealth faster and in the short term, that's the route they will go.
Damn man, you actually understand. Good for you, and welcome to the club of the abused who know how the world works, but will be castigated for understanding.[:)]0 -
When I was at Union Oil 25 years ago a 42 gallon barrel of crude oil could be refined into about 19 gallons of finished regular grade gasoline. Today that same barrel yields about 21-1/2 gallons, or about 8% more motor fuel per barrel. Actually due to the addition of oxygenators like ethanol and other additives the true yield per barrel is more like 25 gallons of gasoline while the remaining crude is broken down into all sorts of other fractions, until you get down to bunker fuels, asphalt and coke...Nothing goes to waste. We can build several hundred new refineries but as long as crude oil supplies remain tight you will not see a major drop in the cost of motor fuels, at least not on the down stream (refinery) end of the business. $60-$70 crude oil means $3+ gasoline no matter how you slice it. 0 -
I say everyone needs to buy a horse. It's slower, but it doesn't break down as much, you don't need to change the oil every 3000 (or however many) miles, it can go over almost any terrain, it's less likely to get stuck in the winter, it pollutes less, and it's a good companion. And with today's gas prices, it's probably about the same cost-wise. 0 -
quote:Originally posted by Jgreen
It's all BS. Gas prices have never "crept" up like you would expect if we were steadily outpacing the supply. It jumps in 20-40 cent incriments.
Now, when W and his pals had the opportunity last summer or thereabouts to take testimony from big oil at congressional hearings, guess what? ONLY IF IT WASN'T UNDER OATH! I don't know why someone just didn't say "Forget it. Why waste the time"....
the democrats are in power, i'm sure gas will plummet to $1.50 a gallon0 -
quote:Originally posted by OJMayo
quote:Originally posted by Jgreen
It's all BS. Gas prices have never "crept" up like you would expect if we were steadily outpacing the supply. It jumps in 20-40 cent incriments.
Now, when W and his pals had the opportunity last summer or thereabouts to take testimony from big oil at congressional hearings, guess what? ONLY IF IT WASN'T UNDER OATH! I don't know why someone just didn't say "Forget it. Why waste the time"....
the democrats are in power, i'm sure gas will plummet to $1.50 a gallon
If they could pull that off, they wouldn't spend so much time out of power.0 -
Here is a plan. Build refineries just across the border in Mexico (EPA kiss mine)and employ potential illegals at wages higher than they would make in the US but less than what US refineries are paying for help. Kills two birds with one stone (or at least partially).
I know, I know.... It's not that simple.0 -
quote:Originally posted by dlrjj
quote:Originally posted by vess1
Well, I'm definately not an econ major but certainly appreciate the replies. Very informative. I just found the story interesting and was curious to see if we could find the bottom line here. As in, is it BS excuses or is it really not feasible.
dlrjj seems to have made a pretty good point. No matter how much money the rich have, they are not going to waste time in ventures that will lose them money. Life is too short and if there are other viable options to increase their wealth faster and in the short term, that's the route they will go.
Damn man, you actually understand. Good for you, and welcome to the club of the abused who know how the world works, but will be castigated for understanding.[:)]
Which is why I tend not to even reply to posts concerning oil or trade in general.0 -
quote:Originally posted by tsavo303
you have no grasp of economic reality.
thats fine, but you might want to keep it to yourself
quote:Originally posted by Odawgp
bottom line they dont want to spend 1/3 of the 30 billion dollars that they just made in the first quarter of 2007.
If i kept it to myself how would i ever grasp, reality.
Dont think that i havent been reading and digestion the things said here today and yesterday. I ordered the Economics book that one suggested i'll read it. but for you too say that i have no grasps of reality is ignorant of you. There are alot of people in this world that didnt go to school to become an economics major or financial advisor, like some of you may or may not be. My reality is right here right now and it getting pretty rough around here.
I am plan and simple work my ass to the core to make a living sometimes 2 jobs 3 if you count the wife's. and it cuts me to the core when people say there is nothing that can be done we cant build refineries because it will hurt us finacially we cant regulate the industry because it will destroy us economically.. GUESS WHAT it hurts me finatialy when CAPITALIST PIGS (dont get me wrong making money is everyone's dream but got damm we are talking billions of dollars here, thus the PIGS) don't want to spend a little hard earned money and make it better for all in the LONG run. NO they want to line their pockets with dollars. And you'll say it's not that simple. well why the hell not. You think it just hurts me when gas is high no it hurts everyone, everyone is loosing money and the trickle down effect will one day hit the oil companies then where will their profits be they had the moeny 10yrs ago they have the money now, BUT lets wait until our profits take it in the shorts rather than do something about it NOW.0 -
the more you make, the more you consume.
what they ought to do is stop making cars for 5 years and force people to conserve what they have.
also too, do away with this move to a new location job chasing money game and force people to stay in geographical locations to be more community minded, the way our oldtimers did, satified with working in hometown usa all their life.[;)]0 -
quote:Originally posted by dlrjj
quote:Originally posted by tsavo303
you have no grasp of economic reality.
thats fine, but you might want to keep it to yourself
quote:Originally posted by Odawgp
bottom line they dont want to spend 1/3 of the 30 billion dollars that they just made in the first quarter of 2007.
People like that NEVER keep it to themselves. It is an absolute requirement for those who have no idea of the subject to expound on it to the greatest extent possible, and refer to those who do understand it as "sheeple" and apologists.
Reality is not a concern for them at any level. The only thing that counts is emotion, and they can't see just how close that puts them to Rosie O'D.
You, on the other hand, have some really serious potential and I'm damned pleased to see another Econ major around here.
spoken like a true HAVE beating a have NOT down.
since when does having an opinion that you don't agree with make me like ROSIE.
not everyone is as well educated in economics as you obviosly are.
I see a situation and how it effects me and i react upon that situation and form an opinion. much the same way you have here.
granted you opinion is supported buy facts and numbers which buy means of your education you can obtain. the only facts and number's i see are the ones of big oil getting bigger and the one's in my pocket getting smaller that is my reality.0 -
Too many people overlook the true cause of the problem and blame the oil companies. Existing refineries are constantly expanding their capacities and can produce plenty of gasoline. No new refineries are needed.
It's free enterprise at work. Supply and demand. WE are the cause of the problem. As long as we buy big V8-powered vehicles that get poor gas mileage, as long as we continue to fill up and go on vacation, crank up the car to go 2 blocks down the road to buy a pack of cigarettes, as long as we pay the price, gas will be expensive.
Insisting on involving government is idiotic. We need to rise above the PC concept of government dependence in every aspect of our lives. Just like everything else in life, we make our choices and live (or die) with the consequences.0 -
I think I've heard/read most of the Oil industry "expalnations" for the skyrocketing prices, which BTW they don't have to explain anything, and I'm the first to admit to being an economic illiterate, but nobody will convince me that there's not price fixing and extreme profiteering going down. Competition? Hard to make a case for price competition when prices go up uniformly at all the different oil co. stations within hours Nation wide. Then you read the of the HUGE record profits they make year after year. One year it's a 300% increase in profits over the prior year, next year it's a 300% increase in profits over the prior record year, and on, and on, one after another. I'm not complaining about profit making, that's the American way, just stating things I see as obvious. It must be great to have virtually an iron fisted monopoly on the most in demand product in the World, and know how to manage it as well as they do. 0 -
Maybe we should start nationalizing refineries. Let the federal government build the next refinery. Since there is so much money in refining gasoline, the tax payers would be investing in America's infrastructure.
It's gasoline refining. What can go wrong? It's a slamdunk money maker.0 -
make to much profit with low supply, and i always find it funny that theres probelms with them come summer 0
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