Do we need more Oil? or more refineries?

[Tmy]

I here the latest spike in gas prices is due to some refineries being closed for 5 minutes cause of the blackouts.

Is that the big problem with our gas? the lack of refineries???

We always here that we NEED to drill in ANWAR or off the Cali coast but what good would that do if theres nowhere to refine the stuff.

Whats stopping the creation of more refineries? Environmentalists? Price fixing oil companies??

[Ziggurat]

Originally posted by Tmy
We always here that we NEED to drill in ANWAR or off the Cali coast but what good would that do if theres nowhere to refine the stuff.


The republicans are the only ones saying we need to drill in ANWAR. The oil companies themselves aren't really that interested, they aren't pushing for it because they know there isn't all that much oil up there and because drilling up there would be expensive - it's harsh conditions in a very remote location. ANWAR is a political fight, it's not a serious energy issue.

[Segnosaur]

Originally posted by Tmy
I here the latest spike in gas prices is due to some refineries being closed for 5 minutes cause of the blackouts.


I think they were closed for a little more than 5 minutes... The blackout itself probably would have knocked them out for at least the Friday, and some areas (such as in Ontario) were reducing power usage for the following week (so the refineries may not have been running at full capacity.)

The loss of refinery capacity may be coupled that with the 'hording' of gas after the blackout push up prices.

Personally, I think the large price increase is a combination of several factors (and we just happen to get them all at the same time):
- The blackout
- Temporary increase in demand due to end of summer and Labour day (when people drive more)
- Failure of a pipeline in the southern US
- Iraq still isn't up to full capacity, negatively affecting world supply
- I had heard that the US was diverting some oil into its emergency reserves (anyone have details about this?)

So, I think we just got unlucky that all this happened at almost the same time.

[arcticpenguin]

More oil vs. more refineries

Too bad more efficient vehicles didn't make your short list.

[NightG1]

Originally posted by Tmy
I here the latest spike in gas prices is due to some refineries being closed for 5 minutes cause of the blackouts.

Is that the big problem with our gas? the lack of refineries???

We always here that we NEED to drill in ANWAR or off the Cali coast but what good would that do if theres nowhere to refine the stuff.

Whats stopping the creation of more refineries? Environmentalists? Price fixing oil companies??
Right now it is simple: demand > supply. The Blackout had very little impact on market pricing. I am not trying to defend Big Earl but there is a very simple market fundamental that drives retail gasoline pricing. If we build more refineries then you will need the infrastructure to bring the crude over from the mideast, North Sea or where ever because we can not internally produce or lift enough crude to sustain any increase in domestic capasity. Not sure what current freight rates are for crude but liquid petrochemical rates for styrene/benzene/xylene are at about $38-$39 per ton or $6 per barrel so you start going to market at $6/barrel behind your competition in Saudi Arabia if you are an US or Canadian refiner. There is no volume optimization when you ship feedstocks because there is very little fixed cost unless you are Exxon and own your own fleet. The more you ship, the more you pay. The oil companies probably see the US market for gasoline as balanced to short which is EXACTLY where you want to be if you are a supplier - so no new refineries, no increase in capasity and big volitility on the retail end.

[AlH]

Originally posted by Segnosaur
- I had heard that the US was diverting some oil into its emergency reserves (anyone have details about this?)

IIRC The US is putting about 80,000 barrels a day back into the strategic reserve. Not enough to have any effect on pricing.

[Tmy]

Originally posted by NightG1

Right now it is simple: demand > supply. The Blackout had very little impact on market pricing. I am not trying to defend Big Earl but there is a very simple market fundamental that drives retail gasoline pricing. If we build more refineries then you will need the infrastructure to bring the crude over from the mideast, North Sea or where ever because we can not internally produce or lift enough crude to sustain any increase in domestic capasity.

I guess my question is: ARe the refineries running on full capacity??? Are they overloaded?? Th supply of oil may not change but when theres a problem wh one refinery things get crazy. That doesnt mean we need more oil.

I can have all the frozen hamburgers to feed my customers but that does nothing if I dont have enough cooks to to make the burgers.

[Maximwar]

What we need is for the free market to decide how much drilling we do compared to how much refining we do.

That means opening up oil drilling spots like ANWAR and no price controls.


The republicans are the only ones saying we need to drill in ANWAR. The oil companies themselves aren't really that interested, they aren't pushing for it because they know there isn't all that much oil up there and because drilling up there would be expensive - it's harsh conditions in a very remote location. ANWAR is a political fight, it's not a serious energy issue.

If the oil companies aren't interested, then why do you care if we open it up for drilling? Assuming you are right that they aren't interested in the land, there won't be drilling anyway.


More oil vs. more refineries
Too bad more efficient vehicles didn't make your short list.

Why don't you just let companies decide? If the price of oil goes too high, people will want to switch to fuel-efficient cars and car makers will produce and develop them.

[Tmy]

I think our nations enegery suppy and security is a little to important to leave to the whims of a handfull of profit driven oil companies.

[Ziggurat]

Originally posted by Maximwar

If the oil companies aren't interested, then why do you care if we open it up for drilling? Assuming you are right that they aren't interested in the land, there won't be drilling anyway.


You misunderstand me. They'll drill if you let them, but it's not a very important issue to them because there isn't that much oil up there. ANWAR is not high on their priority list, and even if we open it up no oil would be coming through for years to come. In other words, ANWAR is not a solution to the energy issue. On balance I think it's better to keep as an environmentally pristine area (that has value to society, even if hard-core capitalists don't like it because no one owns it), but even if drilling is allowed, it's going to make little difference.


Why don't you just let companies decide? If the price of oil goes too high, people will want to switch to fuel-efficient cars and car makers will produce and develop them.

Because the cost we pay isn't simply the dollar amount at the pump - the issue is much broader than that. The US tax code also distorts the free market for cars by giving businesses tax breaks for buying hummers that they wouldn't get buying a fuel efficient car, even if they're for the exact same purpose. So if you want the free market to solve this problem, you also need to remove this kind of market distortion.

[Grammatron]

Originally posted by Tmy
I think our nations enegery suppy and security is a little to important to leave to the whims of a handfull of profit driven oil companies.

And you do not think that part of being profit driven is to make sure you have good security so that your company will be there tomorrow?

[Ziggurat]

Originally posted by Grammatron

And you do not think that part of being profit driven is to make sure you have good security so that your company will be there tomorrow?

It's not good enough, there's the potential for too much incentive for individuals at the top to pursue selfish short-term interests. Surely the past few years have shown that individuals are willing to put short-term interests ahead of even their OWN long-term interests. I'm not saying free market dynamics don't have a role in this, but we should NOT depend on them alone to solve problems for us, this is simply too important an issue for blind faith in the market.

[Grammatron]

Originally posted by Ziggurat


It's not good enough, there's the potential for too much incentive for individuals at the top to pursue selfish short-term interests. Surely the past few years have shown that individuals are willing to put short-term interests ahead of even their OWN long-term interests. I'm not saying free market dynamics don't have a role in this, but we should NOT depend on them alone to solve problems for us, this is simply too important an issue for blind faith in the market.

Perhaps, but government is not perfect either. There are individuals who mass with the system for their own benefit.

[Tmy]

Originally posted by Grammatron


And you do not think that part of being profit driven is to make sure you have good security so that your company will be there tomorrow?

HAHHAHAHAHA!! Yeah I can just here the CEO at the next Exxon shareholders meeting.

"Bad news is that profits are down. But dont worry cause our nation is that much more secure because of our actions. You cant see it but its there!" (Standing ovation follows).

[Tmy]

Originally posted by Grammatron


Perhaps, but government is not perfect either. There are individuals who mass with the system for their own benefit.

Yes, and those individulas are commonly called "republicans". :D

[jj]

Originally posted by Tmy
I here the latest spike in gas prices is due to some refineries being closed for 5 minutes cause of the blackouts.

Is that the big problem with our gas? the lack of refineries???

We always here that we NEED to drill in ANWAR or off the Cali coast but what good would that do if theres nowhere to refine the stuff.

Whats stopping the creation of more refineries? Environmentalists? Price fixing oil companies??

A refinery is not something you can start and stop on a dime, or in an instant.

There are a variety of temperature and constituant-sensitive processes, catalysts that require certain temperatures, etc.

Once the refinery is "cold", it is not just a flip of a switch to start getting gasoline and diesel out again, first you have to clean the partially refined materials out, clean your catalysts (or at least some of them), get things back up to temp, get the right atmosphere (not meaning air here) at the catalysts, and then restart the process, and not instantly.

So there is certainly some chance that refinery closure is a problem, but that doesn't justify price gouging, if that's what's happening.

[Maximwar]

You misunderstand me. They'll drill if you let them, but it's not a very important issue to them because there isn't that much oil up there. ANWAR is not high on their priority list, and even if we open it up no oil would be coming through for years to come. In other words, ANWAR is not a solution to the energy issue. On balance I think it's better to keep as an environmentally pristine area (that has value to society, even if hard-core capitalists don't like it because no one owns it), but even if drilling is allowed, it's going to make little difference.

Okay. Well then, as you said before, it is mostly a symbolic debate.

Because the cost we pay isn't simply the dollar amount at the pump - the issue is much broader than that. The US tax code also distorts the free market for cars by giving businesses tax breaks for buying hummers that they wouldn't get buying a fuel efficient car, even if they're for the exact same purpose. So if you want the free market to solve this problem, you also need to remove this kind of market distortion.
The solution-- no government subsidies or tax breaks based on what you buy/do.

I think our nations enegery suppy and security is a little to important to leave to the whims of a handfull of profit driven oil companies.
Nothing is perfect. But the government is worse at handling things like this then the private sector. Mostly because there is no financial incentive for a government beurocrat to get things right.

You say that this is to important to leave to the private sector.
I say it is too important to leave to the government.

[jj]

Originally posted by Maximwar
You say that this is to important to leave to the private sector.
I say it is too important to leave to the government.

Ok, the private sector gave us both teh $2.00 a gallon gas price and the blackout in the east.

Is that one good job and one bad job, perhaps?

(No, that question was not sarcastic...)

[Segnosaur]

Originally posted by jj


Ok, the private sector gave us both teh $2.00 a gallon gas price and the blackout in the east.

Is that one good job and one bad job, perhaps?



Remember, much of the price of gas is taxes. And, as I've said before, we could just be having a bit of bad luck.

As for the blackout, remember, Ontario was also blacked out, and much of our infrastructure is actually government-controlled. (And I think our privately owned nuclear reactor came back on line before the publically owned one.) Note: I don't think that the black out proved governement control was good or bad.

[jj]

Originally posted by Segnosaur


Remember, much of the price of gas is taxes. And, as I've said before, we could just be having a bit of bad luck.

As for the blackout, remember, Ontario was also blacked out, and much of our infrastructure is actually government-controlled. (And I think our privately owned nuclear reactor came back on line before the publically owned one.) Note: I don't think that the black out proved governement control was good or bad.

Well, down here in the USA (you're in Canada, if I recall correctly) we have less in taxes, and more clearly, the taxes haven't changed by 100% in the last two weeks, even though the price of gasoline has changed by close to 33%...

Exactly what's going isn't clear in terms of evidence, but there have been obvious price-gougings in the past when the opportunity presented itself... Is this one? Well, speaking as an annoyed member of the american pubic, I have no way of finding out, and that in itself is really annoying.

As to the blackout, I don't know if we'll agree.

I think that the evidence is clear that at least in the USA the transmission lines have been nearly abandoned because nobody sees any profit in taking care of them, and also because it's actually higher on the price/investment curve to let them break down close to 1% of the time.

Btw, which plant came on-line first is greatly a function of network topology, I'm not sure it would have any real meaning beyond where the net started to reintegrate first.

[Segnosaur]

Originally posted by jj

Well, down here in the USA (you're in Canada, if I recall correctly) we have less in taxes, and more clearly, the taxes haven't changed by 100% in the last two weeks, even though the price of gasoline has changed by close to 33%...


You're right, I am in Canada, and our taxes certainly are higher here than in the US.

And while taxes may not have increased lately, places that charge sales tax will see the overall price of gas rise faster than if no sales tax were applied. (Here in Canada, we have a collection of fixed taxes and sales taxes.)

Originally posted by jj

As to the blackout, I don't know if we'll agree.


We may never agree, because I've never really made my mind up. There are good points and bad points to privatizing the power system. Although I'm leaning towards private control, I'm not yet 100% convinced of it.

Originally posted by jj

I think that the evidence is clear that at least in the USA the transmission lines have been nearly abandoned because nobody sees any profit in taking care of them, and also because it's actually higher on the price/investment curve to let them break down close to 1% of the time.


Here in Canada, the power grid isn't in very good shape. Our publically run utilities haven't invested the money in it either, and they've run up large debts. (So, basically, people are being charged a lot for electricity, they just pay through taxes rather than utility charges.)

There is talk that we need to improve the situation, and private investment into the power grid is often talked about as the way to go.

[subgenius]

If the price increase is due to increased costs why is big oil poised to take huge profits from it?

Look for big profits from Big Oil
http://moneycentral.msn.com/content/CNBCTV/Articles/TVReports/P59662.asp

Somebody 'splain that so that even someone as dumb as me can understand it.

[Grammatron]

Originally posted by subgenius
If the price increase is due to increased costs why is big oil poised to take huge profits from it?

Look for big profits from Big Oil
http://moneycentral.msn.com/content/CNBCTV/Articles/TVReports/P59662.asp

Somebody 'splain that so that even someone as dumb as me can understand it.

I'll give it a shot.

The stocks of both already have done well this year, with Marathon's up about 34% and Exxon Mobil's up about 10%.

Well to someone as "dumb" as me it looks like their profits are being driven by the increased demand in the stock. Now I am not an oil industry annalist so I can't tell you if those prices are inflated, but it sure is helping them with profit.

One more thing, do me a favor and go on google and search for price gouging probes and see how many of them were conducted locally, state wide and federally and what they found. Here is just one of the
latest examples (http://www.bizjournals.com/eastbay/stories/2003/04/07/daily1.html) A California Energy Commission investigation of the state's soaring gasoline and diesel prices has concluded a 36 percent price increase between Jan. 1 and March 17 was the result of world events and inherent market imbalance, not oil companies manipulating supply to increase profits.

[subgenius]

If the higher prices don't generate higher profits (from sales) then why would the stock value go up. Why would you pay more for stock in a company whose profit margin is stable, and is subject to vagaries like supply problems?
Just asking.

[jj]

Originally posted by subgenius
If the higher prices don't generate higher profits (from sales) then why would the stock value go up.

While you are probably right abou ttheir profits, please don't assign any rational behavior whatsoever to the stock market, which is one of the biggest examples of herd-panic followed by greed-panic by herd-panic .... in the world at present.

To assign any rational meaning to the up and down fluctuations of the stock market, you'd have to reach miles, either from the way that a stock that only announced 20% growth would drop by 75% (yes, there were some instances of that in the late 90's) to times when an announcement that "we avoided bankruptcy" would result in doubling a stock price.

There is a rational element to the stock market, but that rational element seems, to me (and, yes, do I have a bit of the requisite mathematics and understanding, to say the least) to result from rational responses to the panicing herds.

Why would you pay more for stock in a company whose profit margin is stable, and is subject to vagaries like supply problems?
Just asking.
Because someone else did, making the stock rise. Not MY idea.

[subgenius]

They are making a higher profit margin (at the pump) despite the claims of higher costs, right?
But that's the beauty of the free market, we could get alternate energy from their competitors. Ooops, I guess not.

Anyway, we all love Big Oil because they've done so much for the American people, so we don't mind, do we?

[nightwind]

The problem is the lack of alternative energy sources.

[subgenius]

Energy Dept Asked to Probe Gasoline Price Rise
http://story.news.yahoo.com/news?tmpl=story&cid=1895&ncid=1895&e=2&u=/nm/20030829/us_nm/energy_gasoline_investigation_dc

Ha, ha, ha, asking The Big Oil Administration to investigate.
That should be easy, though. Just call up your buddies and ask 'em, "Hey, you gouging anyone?"