Gasoline Prices Update
Another email from my brother in the oil industry:
Like I said before, the LONG-TERM answer is to find alternate sources of energy. Here is an article from the Financial Times, Sept 2 which you may also find interesting.
By the way, there were a significant number of rigs in the Gulf that cannot be restarted because they are too severely damaged. Some will have to be towed back to where they were before the storm and repaired first or are totally missing (as in sunk). One of those multimillion dollar rigs is so damaged that it is probably going to be sold for scrap (~$1M). (all of this is very conducive to lowering gasoline prices.............riiiiight!)
Just so there is no confusion on this, I'm not defending high gasoline prices, hey I'm paying through the nose too. I'm just saying that the problem is MUCH bigger and a lot more complex than any one person or group of people....including president Bush....even if he is responsible for all past, present and future hurricanes, as the Dems would have us believe.
US pays the price of years of living dangerously
With gasoline prices in the US at nose-bleed levels, the time has come to blame someone. The government, of course, and the NIMBY attitude that has brought about the BANANA principle (Build Absolutely Nothing Anywhere Near Anybody). And even refiners are to blame, ''reaping wild benefits'' during shortages.
By Sheila McNulty in Houston
For years, industry observers have warned that the US oil refining system has been forced to run ever closer to full capacity to meet rising demand. Yet there has been not a single new refinery built for more than a quarter of a century.
Until now, says John Thieroff of Standard & Poor's rating agency, the US has had the luxury of not having to address the problem. "They could have it both ways: don't build any new refineries because no one wants to live next to them, while also having enough spare capacity - and unfettered access to ample imports - to maintain the status quo,'' he said.
Hurricane Katrina ended that, sweeping through America's energy heartland this week, shutting down nine refineries and leaving another three unable to run at full capacity.
Overnight, 12 per cent of US refining capacity disappeared. And, because of ever tighter environmental regulations, not all of that lost capacity can simply be replaced indefinitely with imports.
"The refining market is at its limit, and the storm kicked it over the limit,'' says Robin West, chairman at PFC Energy, the industry consultancy.
Several oil companies have begun rationing petrol, prompting consumers to hoard and sending prices rising at the pump. Valero, a top US refiner, was forced yesterday to join the list of companies asking the US government to tap its emergency oil supplies to help.
"The market is responding to the overnight loss of almost 2m barrels per day of domestic production,'' said Mary Rose Brown, Valero spokeswoman. "Since the US is already dependent upon 1m barrels a day of imports to meet demand, there is a real fear of shortages in the near-term.''
Why did the US leave itself open to such an energy crisis?
Refiners blame environmental regulations, most recently the low sulphur standards, for costing them up to $20bn over about four years - money that otherwise could have gone toward building new capacity. Mr Thieroff says there was very little capacity added between 2002 and 2004, about 1.5 per cent a year.
In addition, analysts say, the US government has discouraged new refineries with a permission process that is time-consuming, expensive and risky, with local people able to object to new facilities in their neighbourhood. "It's local opposition to a national need,'' Mr West says. "Americans have taken cheap energy for granted for years: I don't care if it is resistance to building new refining capacity or driving SUVs. Now it's coming home to roost.''
Standard & Poor's expects oil prices to remain at or near historical highs, in nominal terms, for the foreseeable future. And David Wyss, chief economist at S&P, warns that "a jump above $100 could well trigger a recession''.
The US government, industry analysts say, is at fault for not being more proactive in preventing such energy crises.
"On energy policy, we've got to get serious,'' Mr West says. He believes demand must be addressed, either by ensuring enough refiners, liquefied natural gas terminals, and so on, to supply it or by forcing Americans to cut back on consumption.
He notes that the same issues being raised today about the refining sector were raised several years ago by declining domestic natural gas supplies.
Why, it was asked then, had the US not prepared by encouraging import terminals for liquefied natural gas (LNG)?
Nobody wanted the terminals in their backyard - indeed they are still objecting - and companies were left fighting local opposition. The result has been difficulties importing LNG and record natural gas prices, just as, following Hurricane Katrina, prices are rocketing for all classes of fuel.
Mr Thieroff questions whether, in this case, it is all the government's fault.
"You have to wonder if refiners have incentive to build new refineries or add big chunks of capacity when they benefit so greatly under such tightly balanced supply and demand,'' Mr Thieroff says. "Look what happens every time there is an outage: everyone else in the region reaps wild benefits. If the refiner suffering the outage has other plants in the region, they often earn more money due to the outage (and the ensuing spike in profit margins) than if it had never happened.''
But getting refiners to add substantial capacity is not the only issue the US government must address. Part of the reason for supply shortages - and subsequent price spikes - after the hurricane is that power outages are rendering useless the pipelines that normally would carry products from those Gulf Coast area refineries still functioning.
Like I said before, the LONG-TERM answer is to find alternate sources of energy. Here is an article from the Financial Times, Sept 2 which you may also find interesting.
By the way, there were a significant number of rigs in the Gulf that cannot be restarted because they are too severely damaged. Some will have to be towed back to where they were before the storm and repaired first or are totally missing (as in sunk). One of those multimillion dollar rigs is so damaged that it is probably going to be sold for scrap (~$1M). (all of this is very conducive to lowering gasoline prices.............riiiiight!)
Just so there is no confusion on this, I'm not defending high gasoline prices, hey I'm paying through the nose too. I'm just saying that the problem is MUCH bigger and a lot more complex than any one person or group of people....including president Bush....even if he is responsible for all past, present and future hurricanes, as the Dems would have us believe.
US pays the price of years of living dangerously
With gasoline prices in the US at nose-bleed levels, the time has come to blame someone. The government, of course, and the NIMBY attitude that has brought about the BANANA principle (Build Absolutely Nothing Anywhere Near Anybody). And even refiners are to blame, ''reaping wild benefits'' during shortages.
By Sheila McNulty in Houston
For years, industry observers have warned that the US oil refining system has been forced to run ever closer to full capacity to meet rising demand. Yet there has been not a single new refinery built for more than a quarter of a century.
Until now, says John Thieroff of Standard & Poor's rating agency, the US has had the luxury of not having to address the problem. "They could have it both ways: don't build any new refineries because no one wants to live next to them, while also having enough spare capacity - and unfettered access to ample imports - to maintain the status quo,'' he said.
Hurricane Katrina ended that, sweeping through America's energy heartland this week, shutting down nine refineries and leaving another three unable to run at full capacity.
Overnight, 12 per cent of US refining capacity disappeared. And, because of ever tighter environmental regulations, not all of that lost capacity can simply be replaced indefinitely with imports.
"The refining market is at its limit, and the storm kicked it over the limit,'' says Robin West, chairman at PFC Energy, the industry consultancy.
Several oil companies have begun rationing petrol, prompting consumers to hoard and sending prices rising at the pump. Valero, a top US refiner, was forced yesterday to join the list of companies asking the US government to tap its emergency oil supplies to help.
"The market is responding to the overnight loss of almost 2m barrels per day of domestic production,'' said Mary Rose Brown, Valero spokeswoman. "Since the US is already dependent upon 1m barrels a day of imports to meet demand, there is a real fear of shortages in the near-term.''
Why did the US leave itself open to such an energy crisis?
Refiners blame environmental regulations, most recently the low sulphur standards, for costing them up to $20bn over about four years - money that otherwise could have gone toward building new capacity. Mr Thieroff says there was very little capacity added between 2002 and 2004, about 1.5 per cent a year.
In addition, analysts say, the US government has discouraged new refineries with a permission process that is time-consuming, expensive and risky, with local people able to object to new facilities in their neighbourhood. "It's local opposition to a national need,'' Mr West says. "Americans have taken cheap energy for granted for years: I don't care if it is resistance to building new refining capacity or driving SUVs. Now it's coming home to roost.''
Standard & Poor's expects oil prices to remain at or near historical highs, in nominal terms, for the foreseeable future. And David Wyss, chief economist at S&P, warns that "a jump above $100 could well trigger a recession''.
The US government, industry analysts say, is at fault for not being more proactive in preventing such energy crises.
"On energy policy, we've got to get serious,'' Mr West says. He believes demand must be addressed, either by ensuring enough refiners, liquefied natural gas terminals, and so on, to supply it or by forcing Americans to cut back on consumption.
He notes that the same issues being raised today about the refining sector were raised several years ago by declining domestic natural gas supplies.
Why, it was asked then, had the US not prepared by encouraging import terminals for liquefied natural gas (LNG)?
Nobody wanted the terminals in their backyard - indeed they are still objecting - and companies were left fighting local opposition. The result has been difficulties importing LNG and record natural gas prices, just as, following Hurricane Katrina, prices are rocketing for all classes of fuel.
Mr Thieroff questions whether, in this case, it is all the government's fault.
"You have to wonder if refiners have incentive to build new refineries or add big chunks of capacity when they benefit so greatly under such tightly balanced supply and demand,'' Mr Thieroff says. "Look what happens every time there is an outage: everyone else in the region reaps wild benefits. If the refiner suffering the outage has other plants in the region, they often earn more money due to the outage (and the ensuing spike in profit margins) than if it had never happened.''
But getting refiners to add substantial capacity is not the only issue the US government must address. Part of the reason for supply shortages - and subsequent price spikes - after the hurricane is that power outages are rendering useless the pipelines that normally would carry products from those Gulf Coast area refineries still functioning.
posted by momlinda1945 | 9:39 AM
0 Comments:
Post a Comment
<< Home