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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.
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.
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.
The state and federal gas tax pays for things like roads. You do like to drive on roads, yes? Well, they don't just pop up and maintain themselves...
By the way, what where Exxon and BP's reported profits last year?
If you want news from today, you have to come back tomorrow.
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.
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.
$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.
Wrong. There is excess capacity.
What really happens is that excess refinery capacity is either mothballed or used to manufacture products for export.
http://www.reuters.com/article/2011/03/21/valero-klesse-idUSWEN981620110321
With the crappy worldwide economy and high prices of crude demand for gasoline is decreasing.
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
By the way, what where Exxon and BP's reported profits last year?
Annual 2012 reports not out yet in most part so these are quarterlies.
* signifies Dow Jones Industrial Average component.
Apple's profit margin was 26.67%.
Google's was 22.20%.
*Intel's was 22.13%.
*JPMorgan Chase's was 21.97%.
*McDonald's was 19.85%.
*Coca-Cola's was 18.48%.
*Cisco's was 17.90%.
*American Express' was 17.12%.
*Pfizer's was 15.58%.
*IBM's was 15.53%.
*3M's was 14.89%
*Microsoft's was 14.21%.
*Walt Disney's was 13.44%.
Ford's 3rd quarter profit margin was 13.35%.
*Johnson & Johnson's was 12.90%.
*Proctor & Gamble's was 12.72%.
*Travelers' was 10.87%.
*Chevron's was 10.70%.
*Exxon's 3rd quarter profit margin was 10.40%.
*Catapillar's was 9.74%.
*GE's was 9.39%.
*United Technologies Corp's was 7.57%.
*Bank of America's was 6.75%.
*Merck's was 6.58%.
*DuPont's was 6.07%.
*Home Depot's was 5.91%.
*Boeing's 3rd quarter profit margin was 5.47%
*UnitedHealth Group's was 5.14%.
BP's 3rd quarter profit margin was 4.75%.
*Wal-Mart's was 3.57%.
Pulte Homes' was 3.57%.
*AT&T's was 3.49%.
*Verizon's was 2.70%.
*Alcoa's was 0.81%.
*Hewlett-Packards was -10.51%.
This a long line because for some reason SlashDot is saying that "Your comment has too few characters per line (currently 20.4)" but I don't know the minimum and why is there a minimum require when a person may be wanting to report facts and I have to keep typing because now it's 25.7 per line which still isn't enough nor is 27.3 characters per line so I must keep typing yet more meaningless stuff here in an attempt to get even more characters per line because even 30.4 characters per line are not enough so even more typing typing typing (where are the infinite number of monkeys when you need them?) because 33.1 characters per line still isn't enough so row, row, row your boat while buying the stairway to heaven as 35.5 characters per line are still not enough and "you seem a decent fellow I hate to kill you" " you seem a decent fellow I hate to die" and 38.2 characters per line are still not enough "we'll never survive" "nonsense. you only say that because no one ever has" and finally
The oil industry was effectively nationalized decades ago. The industry operates under absolutely strangling regulation and government essentially dictates everything that happens at a refinery right down to when the workers take a leak.
Um, So The Fuck What?
If you want to see tight regulation, try working in a pharmaceutical facility. Or maybe a nuclear plant. Guess what: if your workplace is likely to affect the health of LOTS and LOTS of people, I WANT it tightly regulated.
Actually, the best way to demonstrate what happens without any kind of regulation at all, is to look at what is going on in Nigeria:
Almost 1.9 million barrels have have been spilled into the Niger river delta in the 20 years between 1976 and 1996 in close to 4,900 different incidents, and there doesn't seem to be any indication that this is going to reduce in the future.
See, in Nigeria there seems to be absolutely no business consequences to any kind of oil spills or accidents, so when the expenses of fixing a problem is greater than the expenses of the losses of oil, there's no incentive to pay for a fix.
After all, the only ones feeling the consequences is the local population, and they obviously aren't worth much to anyone.