Getting Better Transparency From Oil Refineries 217
Hugh Pickens writes "Gregg Laskoski reports in U.S. News and World Report that virtually all of the retail gasoline price volatility that Americans experienced this past year was connected to significant problems at refineries. It was those refineries' vulnerability that subjected U.S. consumers to the year's highest average price ever, $3.63 per gallon. February delivered the BP refinery fire in Cherry Point, Washington that led to gasoline price spikes all along the Pacific coast, refinery problems in the Great Lakes region pushed Chicago gas prices to an all-time high of $4.56 per gallon, and over the summer, west coast refineries incurred outages, and California saw record highs in most markets, with Los Angeles gasoline's average price peaking at $4.72/gallon in October. Finally after Reuters reported that some 7,700 gallons of fuel spilled from Phillips 66's Bayway refinery in Linden, NJ, after Hurricane Sandy, New Jersey environmental protection officials said they were not made aware of a major spill at the Bayway plant, and the refinery failed to respond to inquiries from Reuters reporters. 'Too many times, history has shown us, the Phillips 66 response or lack thereof characterizes the standard practice of the oil industry. Refineries often fail or are slow to communicate problems that create significant disruptions to fuel supplies and spikes in retail gasoline prices. More often than not, scant information is provided reluctantly, if at all,' writes Laskoski. 'When such things occur is silence from refineries acceptable? Or does our government and the electorate who put them there have a right to know what's really going on?'"
Thin margins (Score:4, Informative)
Too Much Regulation (Score:5, Informative)
I spend 10 years working in the oil and gas refining industry, and I can say first hand that most of these problems and prolonged reductions in output are tied directly and wholly to excessive, brutal, inflexible, and sluggish government red tape.
At one refinery we were doing a new control system for, the refiner discovered a bad gas overpressure valve that was leaking slightly. The process for handling such an event is to immediately scram the refinery, and file 12 different applications with EPA, OSHA, and other government agencies to beg for permission to fix it. In that particular case that whole section of the refinery was down for 9 weeks.
Most people have no idea just how difficult it is to deal with the administration, and this one especially, when it comes to oil and gas production. This administration is not at all interested in a steady and cheap supply of oil and gas products - and I say that with firsthand experience.
$3.63/gallon?!? (Score:5, Informative)
Re:Thin margins (Score:0, Informative)
Liar.
The Keystone XL was to be privately funded... they just needed the permission of the state & federal governments... and your boy Obama said no. ...and people called Bush an Imperial President... and now ignore far worse actions.
Re:Capacity (Score:5, Informative)
Wrong. There is excess capacity.
What really happens is that excess refinery capacity is either mothballed or used to manufacture products for export.
http://www.reuters.com/article/2011/03/21/valero-klesse-idUSWEN981620110321 [reuters.com]
With the crappy worldwide economy and high prices of crude demand for gasoline is decreasing.
Re:Thin margins (Score:2, Informative)
1. Taxpayers are not funding this.
2. The reason for the pipeline is to reduce costs. It's much cheaper than rail or trucking. That will translate to a mix of several positive effects.
a. lower prices
b. less oil imports
c. better profits
d. more exports of finished products
Re:Yes, better transparency! (Score:5, Informative)
By the way, what where Exxon and BP's reported profits last year?
Annual 2012 reports not out yet in most part so these are quarterlies.
* signifies Dow Jones Industrial Average component.
Apple's profit margin was 26.67% [yahoo.com].
Google's was 22.20% [yahoo.com].
*Intel's was 22.13% [yahoo.com].
*JPMorgan Chase's was 21.97% [yahoo.com].
*McDonald's was 19.85% [yahoo.com].
*Coca-Cola's was 18.48% [yahoo.com].
*Cisco's was 17.90% [yahoo.com].
*American Express' was 17.12% [yahoo.com].
*Pfizer's was 15.58% [yahoo.com].
*IBM's was 15.53% [yahoo.com].
*3M's was 14.89% [yahoo.com]
*Microsoft's was 14.21% [yahoo.com].
*Walt Disney's was 13.44% [yahoo.com].
Ford's 3rd quarter profit margin was 13.35% [yahoo.com].
*Johnson & Johnson's was 12.90% [yahoo.com].
*Proctor & Gamble's was 12.72% [yahoo.com].
*Travelers' was 10.87% [yahoo.com].
*Chevron's was 10.70% [yahoo.com].
*Exxon's 3rd quarter profit margin was 10.40% [yahoo.com].
*Catapillar's was 9.74% [yahoo.com].
*GE's was 9.39% [yahoo.com].
*United Technologies Corp's was 7.57% [yahoo.com].
*Bank of America's was 6.75% [yahoo.com].
*Merck's was 6.58% [yahoo.com].
*DuPont's was 6.07% [yahoo.com].
*Home Depot's was 5.91% [yahoo.com].
*Boeing's 3rd quarter profit margin was 5.47% [yahoo.com]
*UnitedHealth Group's was 5.14% [yahoo.com].
BP's 3rd quarter profit margin was 4.75% [yahoo.com].
*Wal-Mart's was 3.57% [yahoo.com].
Pulte Homes' was 3.57% [yahoo.com].
*AT&T's was 3.49% [yahoo.com].
*Verizon's was 2.70% [yahoo.com].
*Alcoa's was 0.81% [yahoo.com].
*Hewlett-Packards was -10.51% [yahoo.com].
This a long line because for some reason SlashDot is saying that "Your comment has too few characters per line (currently 20.4)" but I don't know the minimum and why is there a minimum require when a person may be wanting to report facts and I have to keep typing because now it's 25.7 per line which still isn't enough nor is 27.3 characters per line so I must keep typing yet more meaningless stuff here in an attempt to get even more characters per line because even 30.4 characters per line are not enough so even more typing typing typing (where are the infinite number of monkeys when you need them?) because 33.1 characters per line still isn't enough so row, row, row your boat while buying the stairway to heaven as 35.5 characters per line are still not enough and "you seem a decent fellow I hate to kill you" " you seem a decent fellow I hate to die" and 38.2 characters per line are still not enough "we'll never survive" "nonsense. you only say that because no one ever has" and finally
Re:Blame Regulation (Score:2, Informative)
Whatta ya mean! The US was a net exporter of gasoline last year. We have plenty of refineries but the oil companies don't want to carry a lot of extra capacity because it costs money to maintain it. The most cost effective way for them to process petroleum is with fewer bigger refineries with minimal extra capacity. So yes, if a significant disruption like a refinery fire occurs it echos through the system. But don't think anyone wants to build new refineries. Perhaps you could give some examples of refineries that have been turned down. Not only that but with increasing fuel efficiency standards and the advent of cars that use little or no gasoline like the Volt and the Leaf there probably isn't a need for new refineries anyway.
Re:Yes, better transparency! (Score:3, Informative)
Re:How would it help? (Score:4, Informative)
If a single shut down can raise prices, then we are at capacity
Actually you're missing one very key market force. Time.
There is an absolute glut worldwide in refining capacity. In many countries refineries are closing down. Margins are razor thin that many refineries are run at a loss and the profits are made up by retail sales. What would happen if Cherry Point burnt to the ground completely? Nothing different than what happened when they burnt through their crude unit and were taken offline for a month.
Your problem is time. It takes about 12 weeks for oil to get from the ground to the bowser. Most of that time the products are in transit or in terminals. Refineries purchase crude oil months in advance to seal in contracts. The stuff is on ships many weeks before it gets used and gets blended in tanks thereafter. What happens when a refinery is suddenly taken offline is that for a period of 1-3 weeks there's a major upset in the supply chain. Not a lack of total production, but a lack of deliveries in a timely fashion. The only way to get around this is to ensure your entire country is a net exporter of petroleum products.
Even then, if you're a net exporter, and you have a glut of capacity, all of your products are likely under a retail contract. The sudden loss of a refinery will still upset the market as one needs to weigh the possibility of being blacklisted as a supplier due to failure of meeting existing contracts in favour of handling a local emergency.
We see very similar things in my country which a net importer of gasoline by a massive margin. The refineries are small but our net import shields us from such problems to some degree. When the only refinery in our city shutdown due to an explosion in their cracker it was down for 3 months, the price spiked for a week then returned to normal. The net import meant we had a lot of supply already on the way and didn't need to rely on local production.
There's really no way to win this.