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How a massive refinery shortage is contributing to high gas prices
In addition to high crude oil prices, refining for gasoline is the other bottleneck. Gasoline are produced locally and there are finite number of refinery plants across the nation. To build new ones takes over a decade given the safety requirements.
In addition to high crude oil prices, refining for gasoline is the other bottleneck. Gasoline are produced locally and there are finite number of refinery plants across the nation. To build new ones takes over a decade given the safety requirements.
They are quite successful at directing the conversation to how hard it is to build new refineries. What is seldom discussed are refinery closures, the yearly gambit with changing the seasonal formulas, and the ever-popular down for maintenance when prices are high.
Me thinks it would be a simpler task to modernize and upgrade an existing facility than it would be to get permits for new facilities.
Nearly everyone is a NIMBY when it comes to refineries. They have to be built where pipelines or tankers can get to them. In the latter case, new refineries tend to spoil waterfront views that are now typically expensive real estate. Whereas people living near existing refineries would be tickled pink if they were upgrading safety along with capacity.
I did read your earlier post on crack spread and oil companies are making a lot of money. Modernization of existing refineries is not cheap but it is a necessarily for safety and the ability to produce other grades of fuel. Think many don’t want to invest their own money.
Well, that NPR article did make a lot of sense from the viewpoint of investing. It's hardly a secret that there is major pressure against the continued use of fossil fuels. It's only rational for people to look elsewhere when allocating their investment dollars.
This, along with a certain amount of the usual game-playing by the major refiners, has resulted in the current shortfall of refining capacity. One solution would be for the government to partially subsidize the reopening of some recently closed refineries, with profit caps, to provide a "bridge" until the use of fossil fuels is finally downsized to an irreducible minimum.
Given the current state of political divide, that's unlikely to be happening.
I did read your earlier post on crack spread and oil companies are making a lot of money. Modernization of existing refineries is not cheap but it is a necessarily for safety and the ability to produce other grades of fuel. Think many don’t want to invest their own money.
Two of the remaining five refineries in the San Francisco Bay Area are switching over to alternatives. Marathon's refinery at Avon shut down during COVID due to lack of demand. It's going to bio-diesel. The Phillips refinery at Rodeo is switching to processing fats, grease, and vegetable oils into a variety of products including aviation fuel.
I am so happy that the refineries are converting from refining dirty gasoline to refining clean biofuel, even though the resulting refinery capacities will be 69% less. Secretary Granholm told the oil execs not to slow down the conversions to biofuel, so reducing refinery capacities means tighter gas supplies. As the president said, its just part of an “incredible transition”.
NIMBY, I whole heartily agree. Some folk in North Bay are objecting to the Marathon Martinez refinery and Phillips 66 refinery in Rodeo approvals for conversions to biofuel. Please keep them in North Bay, not in my back yard.
Price gouging !! I just posted about huge increase in monthly, average, natural gas bill. Derf
Well, you call it price-gouging. But that seems to be popular behavior with every industry these days. -- Airline fares. Agriculture/food. its impossible to go through a burger drive-through without paying +$10/person, for crap 'food' (it may be Solyent Green). My landlord raised the rent 12%. Housing prices are up outrageous sums since the helicopter money was dropped by Jay "Top Gun" Powell.
The employer I happen to work for has raised its prices on all of its product lines +100% since 2019. --- And we keep having more customers showing up at our door asking for more product.. (i.e. no loss of volumes due to the high prices).
When everyone is "price-gouging", its not price-gouging. its inflation. Inflation is every where and at every time a monetary phenomenon (M. Friedman). Our govt (including Jay "Monopoly Money" Powell) has done this to us.
“5. Can’t we just make more fuel? Swaths of refinery capacity shut down during the pandemic and it’s not easy to bring it back online. The US lost more than 1 million barrels a day of capacity between 2019 and 2022 and the remaining plants were already running close to flat out. Some facilities will never restart, even with profit margins near records. The big, multiyear investments needed for such facilities have become tougher to secure as everyone from policymakers to consumers and financiers eye greener alternatives.”
Counterpoint… the lack of investments in refinery’s or drilling is not due to consumer demand or consumer shifts, it’s a current policy issue. It seems to me that the majority of consumers and policy makers are nowhere near consensus on the issue. I’m not certain that policy makers find the high price of gas to be a problem and they likely view it as an excellent opportunity to promote alternatives.
I am so happy that the refineries are converting from refining dirty gasoline to refining clean biofuel, even though the resulting refinery capacities will be 69% less. Secretary Granholm told the oil execs not to slow down the conversions to biofuel, so reducing refinery capacities means tighter gas supplies. As the president said, its just part of an “incredible transition”.
NIMBY, I whole heartily agree. Some folk in North Bay are objecting to the Marathon Martinez refinery and Phillips 66 refinery in Rodeo approvals for conversions to biofuel. Please keep them in North Bay, not in my back yard.
How close are you to Cherry Point, Ferndale, Tacoma, and Anacortes? Back yard or back 40? ;>)
Comments
https://www.mutualfundobserver.com/discuss/discussion/comment/150168/#Comment_150168
https://www.eastbaytimes.com/2022/06/16/california-fuel-prices-set-to-soar-as-refiners-undergo-work/
Me thinks it would be a simpler task to modernize and upgrade an existing facility than it would be to get permits for new facilities.
Nearly everyone is a NIMBY when it comes to refineries. They have to be built where pipelines or tankers can get to them. In the latter case, new refineries tend to spoil waterfront views that are now typically expensive real estate. Whereas people living near existing refineries would be tickled pink if they were upgrading safety along with capacity.
I did read your earlier post on crack spread and oil companies are making a lot of money. Modernization of existing refineries is not cheap but it is a necessarily for safety and the ability to produce other grades of fuel. Think many don’t want to invest their own money.
This, along with a certain amount of the usual game-playing by the major refiners, has resulted in the current shortfall of refining capacity. One solution would be for the government to partially subsidize the reopening of some recently closed refineries, with profit caps, to provide a "bridge" until the use of fossil fuels is finally downsized to an irreducible minimum.
Given the current state of political divide, that's unlikely to be happening.
Derf
Needless to say, they are being sued.
NIMBY, I whole heartily agree. Some folk in North Bay are objecting to the Marathon Martinez refinery and Phillips 66 refinery in Rodeo approvals for conversions to biofuel. Please keep them in North Bay, not in my back yard.
The employer I happen to work for has raised its prices on all of its product lines +100% since 2019. --- And we keep having more customers showing up at our door asking for more product.. (i.e. no loss of volumes due to the high prices).
When everyone is "price-gouging", its not price-gouging. its inflation. Inflation is every where and at every time a monetary phenomenon (M. Friedman). Our govt (including Jay "Monopoly Money" Powell) has done this to us.
Are you better off now than you were 4 years ago?
“5. Can’t we just make more fuel?
Swaths of refinery capacity shut down during the pandemic and it’s not easy to bring it back online. The US lost more than 1 million barrels a day of capacity between 2019 and 2022 and the remaining plants were already running close to flat out. Some facilities will never restart, even with profit margins near records. The big, multiyear investments needed for such facilities have become tougher to secure as everyone from policymakers to consumers and financiers eye greener alternatives.”
Counterpoint… the lack of investments in refinery’s or drilling is not due to consumer demand or consumer shifts, it’s a current policy issue. It seems to me that the majority of consumers and policy makers are nowhere near consensus on the issue. I’m not certain that policy makers find the high price of gas to be a problem and they likely view it as an excellent opportunity to promote alternatives.
Maybe the printer should furnish EV's to get the job done.
Enjoy your 4/th , Derf