Posted on 01/09/2012 6:08:47 AM PST by thackney
So, just before Christmas I saw a story indicating America was awash in gasoline. In the absense of any other info it appears the oil industry’s answer is to reduce refining capacity because of some alleged “financial woes”.
Can anybody out there tell me what the financial woes are?
But pipelines are EVIL! /s
All those liberals in New York would freeze in the dark without coal and oil.
Isn't the demand greater in the NE corridor than in the gulf states, given the cold winters and dense population?
It does not make sense that the PA refineries are losing money, while the gulf coast can sustain them.
While high oil prices bring lots of dollars to the upstream producers, that high oil price is a cost of feedstock to refineries and has made it a rather tight business as of late.
I would say many business are more economically in the Gulf Coast versus the Northeast. Given more of the available feedstock for those business are located here, it makes even more sense. As an additional plus, it is cheaper to operate a refinery outside of freezing temperatures.
Isn't the demand greater in the NE corridor than in the gulf states, given the cold winters and dense population?
The demand in the Northeast has fallen significantly.
While the gulf coast hasn't seen that amount of decline.
they can be buried in coal and oil, and still freeze in the dark if they won't turn it into electricity and gasoline.
Yep, isn’t that something, a pipeline from here to the northeast is good, but a pipeline from Canada to here is bad.
Regarding the heating oil issue;
I was under the impression that all US refineries had upgraded to ULSD by now...
It does not make sense that the PA refineries are losing money, while the gulf coast can sustain them.”
Closing down of small or obsolete refineries is a trend that has been consistent since the 1970’s. I don't know the specifics on these exact refineries but generally what causes the breaking point is an economy of scale that favors larger refineries for lowest operation cost and greatest profitability that allows sufficient capital investment for modernization.
Under the ULSD regulations, a minimum of 80 percent of the diesel fuel produced for highway vehicles must be ULSD with a maximum sulfur content of 15 parts per million (ppm), while the remaining 20 percent may be low sulfur diesel fuel (LSD) with a maximum sulfur content of 500 ppm. However, beginning June 1, 2010, all highway diesel fuel must be ULSD. Pumps used to dispense diesel fuel into motor vehicles must be labeled as to the type of diesel fuel being dispensed. The 80 percent ULSD production requirement is intended to ensure that ULSD is available for use in model year 2007 and newer diesel vehicles, which require use of ULSD.
http://epa.gov/oecaerth/civil/caa/ultralow-sulfurdieselfuel.html
Locomotive, marine and non-road diesel fuel standards begin at later dates (except in California).
http://www.clean-diesel.org/nonroad.html
Can anybody out there tell me what the financial woes are?
If a refiner (or any business) can not obtain a profit from the facility it operates, it must consider the alternative.
Ask the stock holders of these companies what they think.
(Look in your 401K or mutual fund first)
I guess the northern refineries have unions and stricter environmental laws to contend with. Yes, things have changed since the 70's. Many jobs have been lost to new technology, as well.
Good thing next year’s firewood is virtually free around here. Thanks to Irene and the Halloween snow storm I can cut, split and stack firewood for about $20-30 a cord. a cord of wood displaces about 150 gallons of heating oil for me.
At least he did, when his boys were old enough carry and split. Surprisingly, when I went away to college, they rarely used that wood furnace. I had become the chief splitter using a maul or wedges and sledgehammer.
I wonder why refineries don’t just produce one product.
Less likely to have a mistake or contamination, fewer storage issues, costs are the same...
I suspect most do. But some of those, particularly smaller refineries, may be producing one product that does not yet meet ULSD and have a much more limited market. Eventually they will have to change.
costs are the same...
Everything correct until that. Cost are not the same. Essentially every refinery has to add new or enlarged hydrotreat desulfurization units, or buy much higher priced very sweet crude oil. Even after built running fluid through those units is $/barrel.
Also, some of the larger refineries are essentially 2 or 3 refineries inside one fence. Some have complete trains for all the processes with even separate storage yards. They share some utilities and have the ability to move product from one to another, but normally don't.
Those must be the older plants.
When the switch was made at Pine Bend, it took about 15 seconds to decide to make 100 percent low sulfur.
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