Skip to comments.Delta reaches deal to buy oil refinery
Posted on 04/30/2012 2:40:40 PM PDT by rawhide
Delta Air Lines has reached a deal to buy an oil refinery, after weeks of speculation about such a deal.
In the unusual deal, a Delta subsidiary called Monroe Energy LLC reached an agreement with Phillips 66 to buy the Trainer refinery south of Philadelphia.
Monroe, a wholly-owned subsidiary, will receive $30 million in state government assistance from Pennsylvania for job creation and infrastructure improvement. Beyond that, Monroe will invest $150 million to buy the refinery and an additional $100 million to convert the facility to produce as much jet fuel as possible.
That production, along with deals to exchange gasoline, diesel and other refined products for jet fuel, is expected to cover about 80 percent of the jet fuel Delta needs in the United States.
Delta said it expects its ownership of the refinery will allow it to cut its fuel expense by $300 million annually.
It will be interesting to see what the other big air carriers do if this decision proves to be quite successful?
Vertical integration worthy of an airline.
I want one too.
“I want one too.”
A refinery or an airline?
These days it looks like one should have both, though airlines have arguably never been profitable.
I’ve never understood why the airlines, package delivery and OTR companies hadn’t formed co-ops by now.
Good for Delta, I guess. (Not my favorite airline. They’ve stranded me three times.)
However, the issue is that this refinery produces the low vapor pressure boutique EPA-approved gasoline that we are required to use in Pennsylvania. It isn’t made anywhere else, at least not in sufficient quantity.
Get ready for $6.00/gallon fuel, my fellow residents of the Keystone State. Maybe this time our fellow citizens won’t make the same mistake they did in ‘08. (I crack me up - ‘course they will!)
This is such a great business idea that the government is bound to find a way to stop it from happening.
I Hope they hire NON UNION
East Coast refining has been under pressure, with a lot of refining capacity shut down. The Trainer plant, idle since last year, is one of one of three Philadelphia refineries that faced closure because of poor profits.
Refineries are the poor relations in the oil industry when it comes to profitability. The problem on the east coast is the source of their oil, it is the highest in the country.
I don’t know how they can make much of an improvement in the profit picture. They’re going to spend some money and the states going to spend some money but they’re at the mercy of their source and that’s Africa and the middle east.
They pay more for their crude than anyone else.
“Vertical integration worthy of an airline.”
Vertical integration IS the future. Why be hostage to some little whipper-snapper that wants to clean you out?
To buy this is a great move for them but a bad move for public airline prices.
Low RVP year round ?
So how long until Dems start screaming about the evil “Big air” corporations?
It changes from winter to summer. That’s the problem - the three Philly area refineries make the summer blend for use in these parts. If they all are shut down and the EPA doesn’t grant an exemption, we are going to be hosed.
It will be interesting to see how Delta Airlines does with the Trainer refinery. At least they’ll keep it open...
I gather that the subsidiary who will run it has the required technical expertise and experience.
The challenge will be the cost structure to make it profitable where Phillips was not. I am guessing that they won’t be unionized.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.