What Happens When a California Oil Refinery Shuts Down? (yahoo.com) 106
A California oil refinery that produces 8% of the state's gasoline is shutting down late next year — a decision the Los Angeles Times says is "driven by climate change, the transition to electric vehicles and demands for cleaner air."
"There's no question we are going to lose refineries over time, because demand is going to go down as we transition to electric vehicles, but I did not expect to see any of them exiting this quickly," said Severin Borenstein, faculty director of the Energy Institute at UC Berkeley's Haas School of Business. California "over the medium term" will have to rely more on imports, he said. "I think part of the response the state's going to need to consider is how to make sure that we can import sufficient gasoline to meet our needs...."
David Hackett, chairman of Stillwater Associates, an Irvine oil consultancy, said he was contacted by Phillips just before the announcement, and was told the closure was a business decision. He said that although the timing was somewhat surprising, the closure wasn't, given the age of the refineries, their relatively small size and the inefficient layout that connects them by a pipeline. "That plant has been for sale for years. It hasn't found any buyers and I think that this has been an economic decision on their part. They looked at the profitability of the place and compared it with the other businesses that they have, and it didn't make the cut," he said.
"The closure is likely to increase California's already high prices at the gas pump, given that much of the replacement gasoline will be shipped in by ocean vessel, analysts say..." according to another article from the Los Angeles Times.
"Environmentalists and community activists cheered the news, however, saying it will mean cleaner air for the thousands who live in the area and that the state must continue the transition away from its dependence on fossil fuels."
"There's no question we are going to lose refineries over time, because demand is going to go down as we transition to electric vehicles, but I did not expect to see any of them exiting this quickly," said Severin Borenstein, faculty director of the Energy Institute at UC Berkeley's Haas School of Business. California "over the medium term" will have to rely more on imports, he said. "I think part of the response the state's going to need to consider is how to make sure that we can import sufficient gasoline to meet our needs...."
David Hackett, chairman of Stillwater Associates, an Irvine oil consultancy, said he was contacted by Phillips just before the announcement, and was told the closure was a business decision. He said that although the timing was somewhat surprising, the closure wasn't, given the age of the refineries, their relatively small size and the inefficient layout that connects them by a pipeline. "That plant has been for sale for years. It hasn't found any buyers and I think that this has been an economic decision on their part. They looked at the profitability of the place and compared it with the other businesses that they have, and it didn't make the cut," he said.
"The closure is likely to increase California's already high prices at the gas pump, given that much of the replacement gasoline will be shipped in by ocean vessel, analysts say..." according to another article from the Los Angeles Times.
"Environmentalists and community activists cheered the news, however, saying it will mean cleaner air for the thousands who live in the area and that the state must continue the transition away from its dependence on fossil fuels."
No way (Score:2, Interesting)
The refinery explicitly said that was not. (Score:5, Informative)
The article explicitly said that the refinery claimed the new law was not the cause of the closing...
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LoB
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Re: The refinery explicitly said that was not. (Score:2)
Yes, the oil company was careful not to blame the recent legislation that CA signed into law - and that very well may be true, I assume this is a decision that took a long time to arrive at...
That said, I've never heard of either a new refinery being built, nor an existing refinery being shut down - why? Because it is all but impossible to get the required permits and approvals to build a new refinery anywhere in America. Oil refiners can expand existing refineries, but old refineries are never shut down.
Th
Re:No way (Score:4, Insightful)
From TFS:
That plant has been for sale for years. It hasn't found any buyers and I think that this has been an economic decision on their part. They looked at the profitability of the place and compared it with the other businesses that they have, and it didn't make the cut,"
Nothing to do with new laws. Everything to do with maximizing profit.
Re: No way (Score:2)
If anyone bought the site for any purpose other than to refine crude oil I suspect the environmental clean-up laws would be brutally expensive. I suspect this land will sit idle, the workers will lose their jobs, and gas prices will go up, not down.
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I'm Going To Quit Dope (Score:2)
"There's no question we are going to lose refineries over time... but I did not expect to see any of them exiting this quickly"
I hear - "I'm going to quit dope, but - tomorrow!"
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https://blog.ucsusa.org/dave-r... [ucsusa.org]
Re: I'm Going To Quit Dope (Score:2)
The refinery met 8% of California's needs today, 2024. Do we really think CA will consume 8% less refinery products in 2026, after this refinery shuts down?
I understand they wanted to sell the refinery for years, and absent a buyer, it makes sense to shutter it, but it would be naive to think the law mandating oil companies store a percentage of their production 'just in case' something happens to CA supply. (If there was a need to replace oil that wasn't delivered to a refinery, it would be nice if the fed
Re: I'm Going To Quit Dope (Score:2)
Typo:
but it would be naive to think the law mandating oil companies store a percentage of their production 'just in case' something happens to CA supply had no influence on the decision.
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Which is ultimately an argument for never doing anything. We have known for half a century what we're doing (actually, what CO2 emissions could potentially do has been known since the 19th century). But after half a century of not just inaction, but active misinformation campaigns, we have to keep plowing that same row longer because "we're not ready, we need more time to do what should have been done decades ago..."
Why the pretense of even caring?
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That opportunity passed a decade or two ago. We squandered that time .
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"Today's going to be really rough. Just another bump..."
Re: I'm Going To Quit Dope (Score:2)
I like it. (Score:2, Interesting)
Everybody gets a little nudge in the right direction. The industry shutters a facility completely instead of renovating or replacing it. Consumers and downstream commercial customers get a little shock to make them understand that the transition cannot be perfectly smooth and free. Energy remains available, just some ancillary things change.
We all need to acclimatize to the coming adjustments.
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Energy remains available, just some ancillary things change.
This is funny way to say that gasoline prices will substantially go up.
Re:I like it. (Score:4, Insightful)
That's how economics works and it is shouldn't be surprising. Remove some supply from the market suddenly and the prices go up until you find a new equilibrium point. And often new business pops up to ride the changes in the market.
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That's how economics works and it is shouldn't be surprising. Remove some supply from the market suddenly and the prices go up until you find a new equilibrium point. And often new business pops up to ride the changes in the market.
It's that last point which is being prevented. In a freer market, that popping up would involve building a new refinery, expanding capacity at an existing one, or increasing imports of gasoline refined elsewhere. I'd be very surprised if California's government allows any of these. The new equilibrium will be higher prices, less demand, and possibly shortages, all of which Sacramento sees as features, not bugs.
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Energy remains available, just some ancillary things change.
This is funny way to say that gasoline prices will substantially go up.
And prices for everything else, because everything gets shipped by truck these days. I'd argue that it's a way to say "You'll still be able to buy gasoline. You just won't be able to afford to buy food anymore."
At what point are we going to accept that California continuing to mandate different gasoline formulations than the rest of the country is splitting us off from the rest of the market, and that we need to roll back those relatively minor environmental laws to avoid bankrupting residents, at least u
Re: I like it. (Score:2)
Re: Surplus in the first place. (Score:5, Informative)
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A point of order: environmentalists are cheering this because the emissions in Wilmington are miserable (between the refineries and LA/Long Beach Harbors). It is a small cut but something that will help local communities deal with the miserable air.
As for more practical advice for Califorinians... get an EV or move out; staying won't be worth it without your own PV and EV.
Re: Surplus in the first place. (Score:5, Informative)
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You don't want to breathe for about a mile radius when they are flaring. The rest of the time it is much more subtle, but noticeable about a quarter mile away plus a half-mile in the down-wind direction. The accumulated health effects are worse though.
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Plus more fuel burned to transport the imported gas...
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They presumably imported crude oil to process in the plant? Importing the finished product instead would presumably be cheaper, as a barrel of crude produces less than a barrel of gasoline.
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"to make sure that we can import sufficient gasoline to meet our needs...."
So they are once again exporting their pollution elsewhere. Typical.
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Re: Surplus in the first place. (Score:2)
Re:Surplus in the first place. (Score:5, Interesting)
The problem here isn't the oil business's sales, the problem here is the amount of oil extraction sites. There's been excavations, drilling, fracking, over every sighting, sample, or just guesswork made by looking at a map. Since the oil industry can't put blame on the electric vehicle industry for the ones that were previously closed down, Oil is trying to put blame on the Electric for the normal shutdown of a "wild guesses" extraction site. Closing this platform is a money-saving decision made because it wasn't pumping out enough oil- if any. Which means Oil is raising gasoline prices because they're removing a unprofitable excavation and want to... raise prices so that they can blame Electric vehicles over this.
Completely wrong, given that an oil refinery has nothing to do with "wild guesses", "extraction sites", "drilling", and it isn't "a platform". It's the place they take crude oil and turn it into things like gasoline that you actually use, and are paid to do it. It's a service business, not commodity extraction business. That's why the person cited in the article didn't expect it to happen so soon, because demand hasn't fallen enough to cause the refining side of the industry to become unprofitable.
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Undoubtedly there will be cleanup costs and liabilities associated with repurposing a former industrial site. They're getting out while the getting is good. The last refinery to exit will likely be the subject of hordes of lawsuits as people realize that they can no longer squeeze blood out of a stone while crying "shame! shame! shame!"
Think about it... if the market is going away, fossil fuel ecosystem companies are going to stop investing in facilities like this one. Then they'll stop maintaining them.
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What is going to be a really strange situation is if the US is ever invaded via the west coast. Both the invaders and the US will have to haul their own fuel if any of the fighting happens in California
The invading AI drones and robots will all be electrically powered. They'll find plenty of charging stations in CA.
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Undoubtedly there will be cleanup costs and liabilities associated with repurposing a former industrial site. They're getting out while the getting is good. The last refinery to exit will likely be the subject of hordes of lawsuits as people realize that they can no longer squeeze blood out of a stone while crying "shame! shame! shame!"
Think about it... if the market is going away, fossil fuel ecosystem companies are going to stop investing in facilities like this one. Then they'll stop maintaining them. Then they might sell them to someone who will cut corners and carry less insurance in the event of an industrial accident, assuming they can find someone crazy enough to assume the liabilities in a state that wants them gone.
We already have a problem with thousands of wells (in just California alone) which need to be decommissioned... but nobody left with deep pockets (except the state) to decommission them.
Well, no surprise there. What you are describing is how the fossil fuel industry has always worked. Extract the fuel with all the pollution that entails, funnel the profits into tax havens and offload the costs due to decades of polluting onto the taxpayer. It's what's know as a 'business friendly environment'.
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And that's not even touching the externalities around it. While I acknowledged that government managing things rarely is ideal, I think high-externalities necessities like fossil fuel production should be nationalized. I think it's Finland that has done it to great success ?
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The abandoned well playbook is repeated in Canada as well. That this is allowed to go on, on top of all the subsidies, is mind boggling.
Re:If it's closing because of demand (Score:4, Insightful)
It will not make the air cleaner because instead of refining in California, refined gasoline must be pumped or trucked into the state, thus actually increasing greenhouse gases.
Stupid environmentalists think that if we just make gasoline impossibly expensive this will all get better. In there mentally damaged way of thinking, people really only drive to work, to school, to get groceries, simply to be annoying. The reality is that driving is a necessity. Every public transportation system in this country, other than New York and Chicago, is profoundly dysfunctional and hemorrhages taxpayer money.
Until this attitude, and the attitude towards nuclear changes, they're not going to accomplish anything, and are best simply ignored. It is actually not possible to build and install solar panels and wind turbines fast enough to meet growing demand let alone offset fossil fuels. The only possible solution is nuclear.
I live in Indiana, and own a Volvo PHEV. This means my car is powered by gasoline and COAL.
Re:If it's closing because of demand (Score:5, Insightful)
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He's probably referring to military spending that would've happened anyway.
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I mean subsidized, as in the entire structure of policy and governance has been built around serving them for over a century. We basically paid taxes to the fossil fuel industry, our sons fought and died in wars on its behalf, and elected governments were repeatedly overthrown in coups they funded (including i
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He's talking about a lot of forms of subsidization. For example, incredibly cheap oil leases. Among other things, oil companies have, for a century, only had to pay a 12.5% royalty on profits from public land leases. Note that that's profits, not revenue. The result is a relatively paltry $2 billion per year. Anyone familiar with the concept of "Hollywood accounting" (where the studio spins off a number of production entities to make a movie with the profits being swallowed by those so that the studio can p
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Not the original poster, but I have some thoughts on this. The thoughts are way more libertarian than my usual thoughts, but in this case, I think that's the right approach. Note, however, the lowercase 'l' there. Let's call it "libertarian with enhanced consequences".
He's talking about a lot of forms of subsidization. For example, incredibly cheap oil leases. Among other things, oil companies have, for a century, only had to pay a 12.5% royalty on profits from public land leases. Note that that's profits, not revenue. The result is a relatively paltry $2 billion per year.
Soooooo... "subsidized" as in "actually taxed, just not as much as leftists think they should be"?
Being taxed at a lower rate than other business IS subsidization, whether you want to call it that or not. They're being given favorable tax treatment on an industry-specific basis, and that's corporate welfare.
Thank you for proving my point. Also, $2B? Try $26B just in Texas [txoga.org], more like.
The oil industry "pays" stat
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You are confusing taxes at the pumps and income tax of the corporations. The reasons we foot the bill, and not them, is lobbyism. Which is also tax-deductible btw. I guess you could consider environmentalists lobbyist organisation as well, but let's look at the stated end goals of both types of organisation: on one side, make the most money, the fastest. On the other side, improve the survival chance of the species and preserve our quality of lives in the coming years. One is for-profit, the other, non
Re:If it's closing because of demand (Score:5, Informative)
It's not closing due to demand but due to artificially high operating costs in California created by the environmentalists.
You just made that up. Did you read the article?
25% of cars sold in California last year [ca.gov] were zero emission. That number is increasing quickly. By 2035, 100% will be required to be zero emission. It doesn't take a genius to look at those numbers and see what the effect will be on demand for gas. Phillips looked at the numbers and reached the obvious conclusion, that it wasn't worth investing to renovate a plant when there would be no demand for its product in just a few years.
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25% of cars sold in California last year [ca.gov] were zero emission.
This is the second sentence of the page you linked:
One in four new cars sold in California are zero-emission (battery electric, plug-in hybrid or fuel cell electric)
One of those things is not like the others.
Yeah, California calling plug-in hybrids zero-emission is a joke. They're zero-emission if and only if you plug them in every night and don't drive very far. The problem is, in all likelihood approximately nobody actually does this [insideevs.com].
The fact that they're allowing plug-in hybrids as part of the 2035 cutoff means that the law won't have nearly the effect that it should.
What has reduced oil demand? Staggering gasoline prices and availability of Teslas to people living in the high-income areas that previously
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He isn't making that up. The facility is aging, no one wants to buy it, and when it shuts down, suppliers will need to ship in refined product from outside the state to make up for the difference in volume.
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In a pure zero-sum game with no elasticity, maybe. But it's not a zero-sum game. By the look of it, any increase in imports due to this will be temporary as the demand for refined gasoline is replaced with the demand for electricity. That won't be instantaneous of course, but why would it?
There is of course the question of how the electricity will be generated. In the worst case scenario, it's with more fossil fuel imports. Ideally though, it's through replacement with renewables, and that does seem to be t
Re:If it's closing because of demand (Score:4, Insightful)
The reality is that driving is a necessity.
Is it though? Or is it an artificial requirement created by poor city design and insufficient alternate mobility? I'm asking this as someone who lives in a city where some 30% of adults don't have a drivers license yet do the things you list just fine.
But in any case your complaint is very narrow minded. Making gasoline impossibly expensive does a lot to solve the problem. There's a reason those people who do drive where I live drive small efficient cars. There's a reason the wife's car has a 3 cylinder engine, and mine is an EV. We still drive (though I don't do it much) but the decision not to by a 5L V8 pickup truck to get groceries was partially driven by the insane cost of fuel.
I live in Indiana, and own a Volvo PHEV. This means my car is powered by gasoline and COAL.
Sounds wonderful. Less gasoline use than a normal car, and the electric portion of your car fed from a power plant outside of the city centre contributing to cleaner air you breath in the city, while also being generated at a significantly higher efficiency reducing CO2 to boot. You made a good decision.
The only possible solution is nuclear.
No thanks. We'll try and solve the problem now, not in 30 years.
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Nuclear solves the problem now
Re:If it's closing because of demand (Score:4, Interesting)
Bear in mind that the kind of city living you describe ultimately still relies on motor vehicles in this day and age. Sure, we can envision a modern city with a delivery system that moves goods around through some sort of sophisticated infrastructure system. Let's say a dumbwaiter type system similar to Star Trek turbolifts. Goods would go in, travel both horizontally or vertically through shafts all over the city and be delivered right to stores, restaurants, other businesses and people's homes. No motor vehicles required. In existing cities though, delivery trucks are, at the very least, currently a requirement to get products to those local stores you can just walk to. Not to mention if you're having stuff delivered, most of the time a truck or car will bring it to you. Even if you did have a city-wide goods delivery system, most likely items coming into the city would still be delivered by truck unless you extend the delivery network everywhere.
Ultimately, those livable, walkable, convenient cities are essentially just offloading their transportation requirements elsewhere. That's how cities work in general, really. They're not normally self-contained and self-sustaining. They are part of an ecosystem that requires offloading a lot of things outside the city. There's nothing wrong with that, of course, but it's just another example of a situation where the externalities are not immediately obvious.
I suppose the terms I could put it in is that driving may not be necessary, but directed transportation from many specific points to many other specific points is. It could be automated, and it could be done with things that don't look like cars, but it still needs to happen for things like cities to exist.
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Or electric box trucks. [freightliner.com]
Or trains with electric locomotives. [wikipedia.org]
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Amtrak's Acela Express makes a profit [archive.is], as does nearly every bullet train in the world.
Meanwhile:
The suburban Ponzi scheme means that nearly every SFH suburb in North America is, in your words, "profoundly dysfunctional and
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You misunderstand. The fuel it is producing is not excess capacity today. But the predicted future demand curve means it doesn't make sense to renovate or rebuild it. It's an inefficient, dated plant, and closing it makes sense for the owners.
So yes, shuttering this facility changes supply. Demand remains constant and will be filled by more expensively sourced alternatives.
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I can see it closing to maintain prices as opposed to letting them fall. If it does raise prices, they'll blame it on the "transition period" and the government, not shareholders caring less about customers than they used to.
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Gas prices in California absolutely suck (seriously, look on GasBuddy sometime). If demand for gas was already low in Cali, they wouldn't have some of the highest prices in the lower 48. Let's pretend instead of oil refineries we're talking about wireless service providers. What happened to postpaid cellular plan costs after T-Mobile gobbled up Sprint?
Yeah, fossil fuels are nasty and bad for the environment, but their production is still subject to the same economic principles as any other commodity. Ga
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Well, if economics functions the way it has said to have functioned since Adam Smith, then as gas prices rise, demand for alternatives will increase; whether that be EVs, more public transportation or re-engineered cities.
Have you ever thought that cheap gas is a subsidy; where someone else (mainly future generations) get to pay for the externalities. Wouldn't a fairer system be one where you pay for the externalities?
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Prices going up because supply is reduced by the exit of a producer is exactly how supply and demand works.
Re: I can't wait! (Score:2, Insightful)
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A Just Transition (Score:5, Interesting)
In the UK, coal was a dying industry in the 1980s. It was effectively killed off by the Prime Minister of the time, Margaret Thatcher. What she didn't do was facilitate any replacement for the coal mines, as a result of which whole communities were, at best, plunged into severe decline or completely destroyed (I lived in Yorkshire at the time, when whole mining villages become ghost towns).
I now live in Scotland, where the oil and gas industry is also in its twilight years. There are those who are vociferously against this, but the main thrust is to ensure that this time there is a just transition, with new jobs being put in place (replacing the building of oil rigs by on and offshore wind farms is one example), so that we don't get the same, wholesale destruction of communities.
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In the UK, coal was a dying industry in the 1980s. It was effectively killed off by the Prime Minister of the time, Margaret Thatcher. What she didn't do was facilitate any replacement for the coal mines, as a result of which whole communities were, at best, plunged into severe decline or completely destroyed (I lived in Yorkshire at the time, when whole mining villages become ghost towns).
Thatcher thought the magic hand of the free market would fix that automagically.
Renewables Require Less Workers (Score:2)
Real reason (Score:2)
Refineries come and go all the time and they are often a tight margin business (on average over time). If you don't have a high volume low complexity, or that complexity doesn't result in an incredibly high equivalent distillation capacity (amount of product you get out, rather than oil you put in) you don't make money and shutdown.
Refineries shutdown all the time, there's a very strong downwards push on margins driven by larger more efficient refineries being able to provide fuel to you locally cheaper tha
time to stop the special CA blends then (Score:1)
But w
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What makes you think giving up on consuming petroleum would be the reason we would sit back and let Israel burn / get burnt? No one is backing Israel for it's petroleum reserves - something which makes up around 5% of its actual trade exports.
The middle east is more complicated than just oil.
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Do you really believe the US would spend billions of dollars every year on Israel if they didn't want the biggest bully on the block in their corner? Seriously?
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Do you really believe the US would spend billions of dollars every year on Israel if they didn't want the biggest bully on the block in their corner? Seriously?
If the U.S. turned it's back on Israel, didn't support them materially anymore, Israel would be annihilated by it's enemies, and the remnants of the Israeli people would be scattered all over the world to anywhere that would take them.
The U.S. supports Israel so that the U.S. can have influence over Israeli foreign policy decisions, which is what too many people don't understand.
The problem is that we don't have enough influence over their policy decisions, as we can see with what they're doing to the Pal
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What subsidies specifically?
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not having environmental laws being as strict as you want is not a subsidy
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Go up thread for a more detailed explanation. While it may stretch the term subsidy, it definitely is an externality that they get a free pass on.
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Most things have an externality that gets passed on, lithium mines for example.
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I will say the same thing for pretty much all natural resources extraction to be honest. If the people are gonna end up paying, they might as well profit directly from it.
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So no subsidy then, the issue is gas is cheap in the USA because we are the largest producer of it, we do not have to import much, therefore it can be cheap....
Now we can address the actual real subsidy we pay for clean energy/EV, maybe we should let the people use the market for that instead of distorting it?
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We've been down this road before. You can start here:
https://www.imf.org/en/Blogs/Articles/2023/08/24/fossil-fuel-subsidies-surged-to-record-7-trillion [imf.org]
https://en.wikipedia.org/wiki/Fossil_fuel_subsidies [wikipedia.org]
https://www.imf.org/en/Topics/climate-change/energy-subsidies [imf.org]
https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs [eesi.org]
https://www.ourcommons.ca/Committees/en/ENVI/StudyActivity?studyActivityId=11504305 [ourcommons.ca]
https://www.reuters.com/business/environme [reuters.com]
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None of the things mentioned there is a subsidy. A subsidy is giving people money to do something, not the lack of taking money from someone. I am not giving you any money right now by not taking it from you. Of course I am limiting my statement to the USA since this is what the topic is, yet you are talking about elsewhere.