What Happens When a California Oil Refinery Shuts Down? (yahoo.com) 48
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:1, Informative)
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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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.
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]
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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?
I like it. (Score:4, 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.
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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.
Surplus in the first place. (Score:2)
Re: Surplus in the first place. (Score:3)
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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.
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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.
Re:Surplus in the first place. (Score:4, Informative)
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'.
If it's closing because of demand (Score:2)
But there is a demand for free clicks and scary article headlines and an endless supply of people who get easily spooked.
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
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.
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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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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 eng
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Nuclear solves the problem now
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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:3)
Socialism for oil companies, not so much for us (Score:2, Interesting)
US oil subsidies that artificially depress the price of gasoline amount to billions of dollars per year. Maybe if Americans had to pay something closer to the actual price of gasoline, the Invisible Hand of the Market would finally, after decades, start to work.
Added bonus: if the US cured its addiction to fossil fuels, we could finally just buy popcorn, put a fence around the Middle East and watch all the terrorist Arabs and terrorist Israelis slaughter each other. That's a huge win for all of us.
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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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What subsidies specifically?
A Just Transition (Score:2)
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 vociferou
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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.
NIMBYism (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