Refineries Stagger Into Spring

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The statistics don't take into account the mergers that the refineries have undergone. These mergers have stifled competition. No refinery is going to undercut another for more market share. They all play the game together very well. Lower capicity- make Americans pay at the pump to advance their adgenda of drilling more in more sensitive areas. They've been doing this since 1924 when they went before congress to plead their case of the fact that there was no more oil to be discovered...

Ed Purinton of NJ 3:17PM June 18, 2008

> if the refiners are having to pay so much and
> dont have the funds to reinvest, then why are
> they making such huge profits at these prices?
They aren't! Have you seen the stock prices of refineries over the last 10-12 months? Valero down 40%, Tesoro down 60%, Western Refining down 85%. Margins have been squeezed as they haven't been able to raise gasoline prices fast enough to offset the skyrocketing oil prices. When oil prices level off, then refineries can start returning to more like normal profitability.

Warren of TX 1:27AM May 25, 2008

I don't have a comment, but I do have a question.
Can anyone tell me where and what years the last five or more refineries were built in the U.S.

William Smith of NJ 12:07AM April 22, 2008

William, if the refiners are having to pay so much and dont have the funds to reinvest, then why are they making such huge profits at these prices?

charles of MN 8:38AM March 15, 2008

William, if the refiners are having to pay so much and dont have the funds to reinvest, then why are they making such huge profits at these prices?

charles of MN 8:38AM March 15, 2008

Refiners are the first to bear the force of crude oil prices. They have to buy oil in the markets to make gasoline, and those high prices will have an impact on what reinvestments are made where. The increased federal mandate for biofuels, which deservedly are receiving a beating in the media from scientists because of their extremely poor environmental footprint and consumer advocates for their lower efficiency, also creates uncertainty for refiners. What Congress is telling the refining industry is that they shouldn't be making so much gasoline anymore because it should be replaced with ethanol, however polluting, less efficient and expensive it is.

William of VA 2:16PM March 04, 2008

Each year, for the last 15 years, American refiners have built, on the aggregate, the equivalent of one new large-scale refinery through capacity expansions existing facilities. They are investing and building.
The Shell-Motiva expansion in Texas announced last alone is the equivalent of one new refinery!
Remember, it's the traders and markets that set the prices, not the oil companies themselves.

William of VA 2:00PM March 04, 2008

Since I wouldn't want any graduate students or anyone else to think I was being deceitful (!) here is another look at the data, this time just the average of the first eight weeks of the year to compare season to season.
First eight weeks of:
1997 90.1
1998 93.2
1999 93.1
2000 85.9
2001 90.6
2002 87.2
2003 86.7
2004 89.6
2005 91.2
2006 86.7
2007 87.4
2008 85.9
These January and February averages are lower than the previous figures, which were indeed entire-year averages, but the only year that the capacity rate has dipped as low as jan-feb 2008 was in 2000.
William makes a very good point that refineries operate at higher capacity rates than other manufacturing facilities.
But when our economy runs on the product they produce, and we aren't building more capacity--for a variety of reasons--then a decline in the capacity rate becomes something worth noting. Not as a criticism of refiners. But just so that we're aware of this one piece of the supply and demand puzzle that can impact prices.

Marianne Lavelle of DC 12:35PM March 04, 2008

As a graduate student I question her methodology. In her citation of the statistics, she puts (first 8 weeks) following the statistics for 2008 which means she is not comparing the same statistics. This is flawed methodology which should have never been approved by her editor. You cannot compare apples and oranges to make a story seem more tantalizing. The analytic reasoning behind her story is inaccurate at best and deceitful at worst.

Madeline of LA 12:12PM March 04, 2008

Domestic oil refineries operate at much higher capacities than other manufacturing facilities. That is a fact. Also, what time frames are part of her average? If she's looking at the winter/spring, then that is when refineries typically take units offline to perform routine maintenance. By looking at the first 8 weeks of this year, she's not accounting for the facilities' routine maintenance schedule. Any by the way, gasoline inventories are at a 5-year high right now.
The last thing Congress should do is single out this industry for punitive taxes that really will hurt industry reinvestment (to the benefit of state-owned oil companies overseas in unsafe areas).
It's disingenuous to say that refineries are not operating as efficiently, and this story unfairly paints a bleak picture.

William of VA 10:34AM March 04, 2008