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Getting Better Transparency From Oil Refineries
Hugh Pickens writes "Gregg Laskoski reports in U.S. News and World Report that virtually all of the retail gasoline price volatility that Americans experienced this past year was connected to significant problems at refineries. It was those refineries' vulnerability that subjected U.S. consumers to the year's highest average price ever, $3.63 per gallon. February delivered the BP refinery fire in Cherry Point, Washington that led to gasoline price spikes all along the Pacific coast, refinery problems in the Great Lakes region pushed Chicago gas prices to an all-time high of $4.56 per gallon, and over the summer, west coast refineries incurred outages, and California saw record highs in most markets, with Los Angeles gasoline's average price peaking at $4.72/gallon in October. Finally after Reuters reported that some 7,700 gallons of fuel spilled from Phillips 66's Bayway refinery in Linden, NJ, after Hurricane Sandy, New Jersey environmental protection officials said they were not made aware of a major spill at the Bayway plant, and the refinery failed to respond to inquiries from Reuters reporters. 'Too many times, history has shown us, the Phillips 66 response or lack thereof characterizes the standard practice of the oil industry. Refineries often fail or are slow to communicate problems that create significant disruptions to fuel supplies and spikes in retail gasoline prices. More often than not, scant information is provided reluctantly, if at all,' writes Laskoski. 'When such things occur is silence from refineries acceptable? Or does our government and the electorate who put them there have a right to know what's really going on?'"
Speculators demand more transparency so they can jack the price of futures every time a breaker trips at a refinery.
Why don't fuel pumps mention the $0.18/gallon federal gasoline tax? Or the $0.38/gallon (California) state gasoline tax? Both are greater profit margin than the "greedy" store, the "greedy" refiner, or the "greedy" oil company.
Regulators (state & federal) have forced refineries to shut down or prevented them from being built in the first place.
NIMBY'ism is also a factor.
Then there is the problem of too many different fuel blends. Dozens across the US, with a small number of refineries servicing each area.
The result of all this, combined, is that a single refinery going down causes huge issues.
Reduce the number of fuel blends across the country. Dont make it take 10+ years just for the possibility to build a new refinery because of all the hoops. More supply == less volatility.
Considering that the American oil industry is one of the most heavily subsidized industries in the country, yes, the tax payers that are funding them have the right to know what they're doing.
They suffer from "political myopia." They can't really be bothered to notice occurrences in the physical world. Only politics is real to them. So, like the Roman emperors who couldn't be bothered to attend to their water systems or roads, our government can't be bothered to look at refineries, or how net energy from hydrocarbons is declining even as supplies increase, or what happens when the potash is all mined out, or what happens when a few more major aquifers are completely drained. They won't be in office by then, they figure. It'll be someone else's problem.
Please do not read this sig. Thank you.
Contrary to what some might expect, not everycompany in the oil industry is making a lot of money these days. With the spike in the Brent crude price, the refineries have, in fact, seen their margins getting thinner every day. As some refineries are in the brink of losing money, dont expext much investment on security or enviroment from them. The only possible solution? The regulator could tighten security requirements, forcing the bad refineries out of business and making the others have a better security performance. The downside? Gasoline prices will go out, as the gasoline from the old refineries will no longer go to the market. I don't know if the american government is willing to pay this price.
Speculators demand more transparency so they can jack the price of futures every time a breaker trips at a refinery.
One of the reasons that gas prices fluctuate overnight is due to speculation - this is just another way of attempting to democratize the "open" market.
As I understand it, the price of crude changes quicker due to speculation than to any other factors - can you think of another item where demand and/or supply will affect the prices on the same level (not due to speculation)?
- Nec Impar Pluribus, or so I'm told.
Let's summarize:
Lack of diversity increases the risk of supply disruption.
Decreased supply increases the price.
In other words, more refineries would increase the supply and reduce the disruption risk.
The problem is that refinery capacity is constrained and every time someone tries to build a new refinery they are nimbyed to death.
I spend 10 years working in the oil and gas refining industry, and I can say first hand that most of these problems and prolonged reductions in output are tied directly and wholly to excessive, brutal, inflexible, and sluggish government red tape.
At one refinery we were doing a new control system for, the refiner discovered a bad gas overpressure valve that was leaking slightly. The process for handling such an event is to immediately scram the refinery, and file 12 different applications with EPA, OSHA, and other government agencies to beg for permission to fix it. In that particular case that whole section of the refinery was down for 9 weeks.
Most people have no idea just how difficult it is to deal with the administration, and this one especially, when it comes to oil and gas production. This administration is not at all interested in a steady and cheap supply of oil and gas products - and I say that with firsthand experience.
Constantly, the oil company profits do nothing but rise. God forbid they should be regulated - or taxed! HORRORS!!!
$3.63/gallon? $3.63/GALLON?!? If your northern neighbours saw those prices there would be a line up 3 blocks down the fucking road!!! We haven't seen prices that low since at least 2002. Americans need to stop bitching about having some of the lowest gas prices in the world.
The government of the people doesn't care enough. As long as we aren't too immediately inconvenienced by the production of fossil fuels, we're willing to put up with all sorts of pollution, corruption, and other difficulty.
7,700 gallons is a MAJOR spill? Isn't that about what one semi hauls?
If the government would get the hell out of the way and allow more drilling and more refineries, we would be isolated from price spikes if a single one was out of commission...
Cut
Kill
Dig
Drill
Love, Sarah P.
Faster! Faster! Faster would be better!
Check out this Nov 14, 2012 article "Study: California refineries operated during periods blamed for gas price spikes
http://www.mcclatchydc.com/2012/11/14/174662/california-refineries-operated.html#storylink=misearch#storylink=cpy
"West Coast gasoline price spikes in May and October were widely blamed on refinery outages, but new research to be released at a California hearing Thursday shows that refiners continued to produce gasoline in periods when the public was told the contrary."
There is nothing inherently hostile about demanding transparency.
>> Or does our government and the electorate who put them there have a right to know what's really going on?
Did I miss something? Did we nationalize the oil companies last night? Are we Venezuela or Russia?
we have had 1.499 AUD/L for weeks here on standard 91 octane
convert to gallons and to USD and thats 5.97274 USD/Gal
stop complaining
Leah McGrath Goodman, a financial reporter, wrote a book about Nymex and the transition to electronic trading in the early 2000s. It's called "The Asylum" and verifies a lot of what you guys are saying.
Except that the regulators in the government are kind of... on the 'same team' . . . the head of the CFTC left and to work for the New York Mercantile Exchange. She documented the whole thing. Hell of a story.
The problem is that for the most part people did not respond appropriately to those price signals. Rather they went to the government to complain, went to their churches to hear conspiracy theories about how the liberals wanted to destroy the christian way of life, blaming regulation, speculators, evil oil people gouging the common people. All these are partly true, and gouging people who are too stupid to make adjustments so they don't get gouged is fun and profitable, but it does come down to choices.
If a single shut down can raise prices, then we are at capacity and there are only two choices. The first is to raise the price of the commodity, i.e. refined petroleum, so the refiners will have an incentive to build more capacity. Regulation will raise this costs, but so will the need of refiners to pay the expected huge salaries(sometimes well over 100K to a college grad).
The other is to use less so that current capacity is sufficient, reserves can be built, or older plants can be shut down and maybe updated.
The problem is that neither of these are acceptable to the whiners who expect the government to give them everything for nothing. Who expect to live in suburbs and have the city people subsidies their lifestyle. For those that will not drive their cars so they can approach 30 mph instead os 20 mph
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
we have had 1.499 AUD/L for weeks here on standard 91 octane
convert to gallons and to USD and thats 5.97274 USD/Gal
stop complaining
Or the folks down under should START complaining
The price breakdown in Australia, according to: http://www.raa.com.au/page.aspx?TerID=1139
Crude Oil Price $0.70
Refinery Gross Margin $0.02 (includes production costs and profit)
Wholesale Gross Margin $0.09 (includes transport, insurance costs and profit)
Retail Gross Margin $0.06 (includes transport, insurance costs and profit)
Fuel Excise Taxes $0.38 (this figure is capped at 38.143 cpl)
GST $0.12 (10% of pump price)
Retail Pump Price $1.37
So the refiner makes $0.02/l, and the government gets $0.50/l
$1.35 / L ~ $5.11/gallon
and that would be considered an average price for fuel.
At $1.25 / L ~ $4.73/gallon, that would be the lowest price we paid in 2013.
At $1.45 / L ~ $5.49/gallon, that would be the highest price yet.
Stop complaining and get a more decent car instead that cost less in fuel.
Employees should not audit their bosses
What's the median income in Austrialia? $67K
What's the median income in the US? $44K
Stop complaining about paying 50% more for gas in a country where the average person makes 50% more money.
Failure to quickly report any insult to the environment by corporations is a conspiracy and should carry severe penalties. Both the oil and coal industries have horrid safety records and are essentially a form of organized crime.
And yes, our government is slow to respond and may seem excessive. I believe that it was Ben Franklin that remarked that a good population requires little government. The size and intrusion of government is directly related to the honesty and decency of the people and the businesses in the nation. Every time industry values profit above right then they in effect beg for more intrusion, more laws, and stiffer penalties. Also the more we support oil and coal the slower alternate sources can make their way in the market.
For example the BP spill in the Gulf of Mexico was criminal enough that not only should BP be bankrupted but many executives should be in prison. Adequate punishments are not applied. The phrase safety first is more than a slogan. It means safety before even economic survival for a company. When safety really comes first accidents simply would not be so common. Yet this is the same industry that wants to pipe shale oil across America.
how significant has the alkyation process become? as the highest grades of oil would most likely have been extracted first, there may be a strong trend towards grades that require increasing extent of separation, alkylation and blending.
balancing this with the transportation and caching of both oil and petrol makes it one of the more economically important optimization problems.
then there is the trade off for pollution. more alkylation requires more polluting industrial processes which our society is still not ready to face honestly. if the increasingly harmful emissions result in a unreasonable health cost this issue may eventually become undeniable. lets hope the transition to electrical vehicles is progressing well, well before this occurs.
1) Why do new refineries need to be built when companies are meeting capacity by upgrading and retrofitting old ones?
2) Please provide an example where regulation has "forced refineries to shut down or prevented them from being built in the first place."
It hides the fact that the government is largely to blame for gas prices. Stuff like this happens, but government still prevents any new refinery's to be built. Government (namely the Democrats) prevent all drilling they can, they can't stop drilling on private land. You can blame speculators, but they can be easily stopped from bring up prices simply by allowing more refineries to be built and allowing more drilling. How do people not know this?
its like C(A + B) = $. People blindly blame C and ignore A and B which causes C to become the problem. Government is always the problem, never the solution.
Build more refineries, bigger refineries, and we won't have this nonsense
Er, by nonsense you mean higher profit margins every time a refinery goes down? Guess who goes "envirowacko" and lobbies against competitors building new refineries based on environmental grounds? Guess who reports their refineries are down and enjoys the spike in prices while their refineries are actually still producing and they are stockpiling gasoline?
We executed Gulf War I to prevent Saddam from controlling Kuwait's oil fields and stop threatening the Saudi fields.
Greenspan said that we were in Iraq for oil. Controlling global energy sources was likely a significant sweetener for going into Iraq.
It's directly linked to our quality of life. So you better believe the society, via the government, should be getting a clear picture of WHAT EXACTLY is going on with the oil supply chain.
Can you drill from helicopters?
Learn to love Alaska
...is called Vaseline.
If states like California would allow more refining capacity to be built, then the supply end of the market would have more of a 'buffer' to supply problems (if you have a refinery they build these large things called tanks to store petrol in, this boots your supply and you can crank up capacity if you need more). If you don't believe me you can read this: http://www.slate.com/articles/business/moneybox/2004/06/the_great_refinery_shortage.html
There hasn't been one built in California for at least 30+ years because of environmental restrictions. I was talking to a VP of an oil distributing company, he said that 10 years ago they were trying to get additional capacity for their oil refinery, each time they were rejected because of these regulations and today it would be prohibitively expensive to add capacity. This is not just a problem for California either... just look at what has been built in the last 40 years and where http://www.eia.gov/tools/faqs/faq.cfm?id=29&t=6 . We are all to ready to fill up our vehicles, but when you bite the hand that feeds you, it may have a hard time delivering.
"Or does our government and the electorate who put them there have a right to know what's really going on?'"
Last time I looked the electorate was the oil companies and they know exactly what is going on.
I can't see; the transparency is all covered with oil.
You're a fucking ass-hole.
Refineries are operating nowhere near capacity and never have. When oils supplies start to peak, refineries go off-line and oils wells get capped. You never have maximum output.
Then combine that with speculators driving up the price over any issue, the oil prices remain artificially high.
Is this why the oil company executives have to go in for their annual (or more often) roasting in the senate?
Whether you like it or not, diesel drivers are buying fuel with some unknown percentage of biodiesel. The problem is, we don't know what kind or how much or what tests it has passed and failed. To quote from pcmarinesurveys.com, "biodiesel is a very aggressive solvent. Even USCG Type-A fuel hose is not completely immune. Some metals are also not recommended including copper alloys, common brass valves and fittings. Any spilled fuel will rapidly attack paint on engines, bilges, etc. Rubber engine mounts will be affected. On deck it will attack paint and bedding compounds, gelcoat, acrylic hatches and boat shoe soles. It appears that it may also affect fiberglass tanks if they are not specially coated. It certainly will dissolve and mobilize old scum and deposits in the fuel system.
Newer engines with all Viton seals and gaskets can probably use it. Older engines are probably questionable. If the fuel causes any problem, the engine manufacturer may not consider it a warranty issue - it is your problem. "
Obviously cars and goods road vehicles are going to be attacked to some degree too.
Then what about gasoline cars, now being fed 10% ethanol in the USA. That also corrodes metals. Motorists are the victim of "eco" policies which are totally ignorant of the fact that by attacking vehicles, plant, and engines, you shorten their life, waste manufacturing effort, cost the economy billions in failures, and diminish food production. Can't just blame the refiners, though - they have done what the politicians asked of them. What they could do is be more open and honest about the fuels and their harmful consequences.
Good luck with that.it's clear as mud. How's that workin' out for you?
The mind conceives, the body achieves, the spirit manifests.