I am totally in favor of the free enterprise system, without government interference. However, this week we are once again being told that “down time” at several refineries are resulting in a shortage of supply, and our prices are jumping up again. When will this finally stop? Why can’t the oil companies schedule regular maintenance and build additional or even backup facilities to prevent this from happening on a weekly basis? The Alaska oil pipeline was shut down for a leak, then after the public outcry, they suddenly fixed it quickly. Do the oil companies think everyone else is as stupid as the politicians?
They do schedule regular maintenance, but the infrastructure is huge and you can’t predict everything.
Do you think that the oil companies can just build new facilities whenever they want to? They have to jump through all kinds of legal hoops and fight the environmental watchdogs.
And what about all the fuel the government is using to fight the war? And all the fuel these early-bird politiciams are wasting flitting around the country campaigning a year early! I won’t listen to any of them, I’m so disgusted!
Why the hell should they build more capacity, if they read in the papers that Congress is going to mandate x billion barrels of corn-based ethanol fuel, with the intention of replacing petroleum-based gasoline? If you were operated an Italian restaurant, and Congress was talking about mandated Mexican restaurant expansions and additions, would YOU increase your main eating area, at great expense to you?
The NIMBY environmentalist whackos won't let them.
You think they planned on having that leak?
Most refineries are huge Brobdignagian complexes that incorporate machinery that spans up to 100+ years. It’s a wonder they aren’t all off line at once a dozen times a year. The one that a former coworker of mine is at now still has areas with valves embossed with swastikas on them, they were sold by the Germans to the plant before WWII...
If the government used Adam Smith's laissez-faire philosophy, we wouldn't be in this petroleum industry cluster-fcuk.
It is the government and the envir-whackos causing these problems. Not the "big evil oil companies."
IMOHO of course.
That part of the feeder line was shut down for several months while parts were ordered and delivered. TransAlaska Pipeline oil shipments were about 1/2 normal for that time.
Refineries don’t fake down time. They HATE unscheduled downtime. The prices rise, but the refinery with the downtime doesn’t win. It’s the other refineries that win.
There are two of most of everything at a refinery: two pumps per service, two filters, etc. But the few large pieces of equipment, like a coker, gas compressor, or boiler, are unspared. They are very capital intensive.
Refiners do not keep a large permanent maintenance staff. The bulk of their maintenance crews are hired ad hoc and as needed in the spring and autumn maintenance seasons. Due to the volatility of employment in the ''oil patch'', large numbers of temp maintenance workers have left the industry.
Refiners therefore are in the position of fighting each other for crews. If a wildcard such as Katrina comes along, it makes this problem exponentially worse, because everybody wants the workers all at the same time.
Additionally, there is, as in practically every industry, a high degree of variance from company to company in the quality of their maintenance of capital equipment. The recent AK pipe leak? BPAmoco couldn't be bothered to run the pigs. Texas City still mostly down 18 months and counting since the big explosion? BPAmoco, again (although, to be fair, they've had problems getting crews). The Whiting IN outage? You got it, BPAmoco yet again. See a pattern yet? BP, even well prior to the Amoco purchase/merger, has for decades had indifferent-to-rotten maintenance. They just got away with it for a long time, but no more.
I won't even bother elabourating on the other principal cause of price spikes, to wit, how both market and government uncertainty increases price.
In your case, it appears there may be some evidence.
There's stations all over the country shuttering up because of the lack of gas. (/s) They're so broke Murphy Oil in Arkansas is paying college tuition ($50 mil) for everyone graduating high school in one town. Me and my 75 kids are packing up and moving south! Blackbird.
We are being TOLD that shortages are the result of 'down times'! What refineries are affected? What was wrong that resulted in less than full capacity? I just have a problem buying all of the BS that speculators are spewing.......
While driving I-65 N, I listened to a Chicago talk station. Apparently BP in Indiana wants to expand refinery capabilities. Illinois says, “Not too fast at the expense of polluting Lake Michigan”. Whatever the BP proposal, Illinois says that it won’t happen.