US Oil Refiners Tell Congress Not Fixing Fuel Cost

yahoo ^ | May 11, 2006 | Tom Doggett

[kellynla]

U.S. oil refiners are not conspiring to keep gasoline prices high and are not overcharging consumers for motor fuel, the industry's trade group told Congress on Thursday.

Under pressure to do something about soaring fuel costs, President George W. Bush has ordered federal regulators to investigate whether oil companies and refiners are collecting excessive profits from gasoline prices that top $3 a gallon in many parts of the country.

"Allegations of refiner price-fixing, price-gouging and other illegal pricing practices are patently false," Bob Slaughter, president of the National Petrochemicals and Refiners Association, said at a House committee hearing on gasoline costs.

Slaughter told the House Energy and Commerce Committee the refining industry had been subjected to dozens of investigations in recent years by federal and state agencies when gasoline supplies were tight, and in each case the industry was cleared of wrongdoing.

The FTC is scheduled to send Congress a report by next week on the agency's latest probe of high gasoline prices and possible refinery constraints. The report was mandated by Congress last year.

Red Cavaney, president of the American Petroleum Institute, also defended the business practices of its big member companies.

"We condemn price gouging," he told the committee.

The price of crude oil, which in the U.S. market was again above $70 a barrel, accounts for about half the cost of making gasoline.

"Oil companies do not set the price of crude oil," Cavaney said. "It is bought and sold in international markets, and the price paid for a barrel of crude oil reflects the market conditions of that day."

Strong global oil demand, especially from growing economies in China and India, and market concerns about possible future supply disruptions linked to the West's dispute with Iran's nuclear program, were helping to keep crude prices up.

[kellynla]

"Companies are planning to expand refining capacity by 1.4 million bpd in the next few years, Slaughter said."

They should start this year!

[traviskicks]

What a bunch of jokers that are in our incompetent government!

FYI:
http://www.neoperspectives.com/gasoline_and_government.htm

[tophat9000]

"Oil companies do not set the price of crude oil," Cavaney said. "It is bought and sold in international markets, and the price paid for a barrel of crude oil reflects the market conditions of that day."

"Companies are planning to expand refining capacity by 1.4 million bpd in the next few years, Slaughter said."

There seem to be as disconnect in these two statements...Price is drive low supply and high demand, right? ....but the issues is a low crude oil supply for current demand to refine (that the bottleneck) then why would expanding refining capacity be much help if there is a short fall of crude oil to refine with current refining capacity in the first place

yes I know there issue in refining capacity but is that the current issue driving price?

[CROSSHIGHWAYMAN]

One day in the not too distant future....home distilleries will provide go-juice for vehicles and farmers will man the filling stations.

[Cobra64]

They should start this year!

Yup. Just snap your fingers; and it's done.

[Michael.SF.]

They should start this year!

They started last two years ago.

The process to expand refining capacity at a refinery is extensive, expensive and time consuming:

Project conception/preliminary analysis --- 3-6 months
Preliminary Engineering --- 5-7 months
Approval --- 3 months
Permitting/Phase I Engineering --- 6 to 12 months
Procurement of long lead items --- 3 to 6 months
Phase II Engineering --- Secondary procurement -- 6 months
Detail Engineering --- 6-9 months
Construction --- 12-18 months
Manufacturing of long lead items --- 12-16 months

Total time from approval to production can be 2.5 to 4 years depending on many variables. Many of these phases may over lap or be spread out among many companies.

I am currently involved in at least 12 major projects that are for expansions at refineries in the USA and Canada. These projects are in various phases as described above, including some in the construction phase.

[kellynla]

Thanks for the info!

[sinkspur]

yes I know there issue in refining capacity but is that the current issue driving price?

Yes. There is plenty of oil, but not enough refinery capacity to process it.

[Rte66]

Also, not a good match-up between more plentiful lower-cost crude oil and refineries which can make it into the grade or grades of gasoline our cars need - or certain states have mandated that they must use.

[thackney]

Refining capacity has been expanding for a decade. There have not been completely new plants, but there have been expansions and improvements to the existing refineries.

http://tonto.eia.doe.gov/dnav/pet/hist/mocleus2A.htm

[stockstrader]

Congress is the PROBLEM,,,not the solution.

[thackney]

You should keep in mind oil and gasoline are world commodities and not limited to production and capacities only in the US.

[RHINO369]

While that does drive up the price, oil is still 70 dollars a barrel, atleast twice as much as it should. That adds on ALOT of the price increases we've been seeing.

[RBroadfoot]

Of course, that schedule assumes that you can get your permits in a timely fashion and that your firm has ready access to a few hundred million dollars. In other words, it's a best-case scenario.

[KTM rider]

Part of the problem of oil supply is coming from the environmental movement.
The Environmental Lobbys should be bought up on racketeering charges
Here in Commifornia the Oil refineries are under rediculously strict controls and pay outrageous fines on a regular basis. They are forced to constantly alter formulas at some environmental board scientists whim, Recently switching from MTBE to Ethanol at a huge cost for production and the cost is passed on to the consumer....
and I don't even want to get started about drilling.....
I hear Cuba is starting to drill the gulf.

Finally, after all these years...a families' monthly gasoline bill is approaching the astronomical municipal water bill, the TV cable or telephone bill here in California.

[RLM]

The talking heads on TV keep blaming the world price of crude for the high gas prices. Let’s do the math. The per barrel price of oil has gone up from roughly $60 to $70 since the beginning of the year. A barrel has 42 gallons of crude. So if you divide the $10 increase, by 42 gallons, the price per gallon increase is 23.8 cents. And, 87% of the crude is converted to fuel; gasoline, distillates, jet fuel, and still gas.

Here in California the price for gasoline was roughly $2.21/gallon at the beginning of this year. Now it’s $3.40/gallon for the same grade. So the cost increase attributable to the world price for crude is 23.8 cents, yet the pump price has gone up $1.20. Some increased refining cost can be attributed to California’s custom blends, and about 9 cents to sales tax, but that still leaves a wide margin for profit, or gouging.

I’m not for price controls, but I strongly favor real competition. I don’t believe in Santa and I don’t believe the congress or any other politician will solve the energy problem, unless they create an environment for competition and energy development, both fossil fuel and alternatives.

[jonrick46]

These feel good investigations into the world oil market have historically revealed the same thing: no price fixing.

Instead of putting all that energy into the investigation into the economics 101 behavior of supply and demand consequence, they should examine the consequence of their regulatory legislation on the oil supply.

Let's call a spade a spade, we should haul the environmentalist up for hearings to examine their role in the buying of legislative favor. It is the environmentalists that have bought the politicians that give those government grants. It is the environmentalist that contrive research outcomes to justify more government grants and more legislative action against the oil producers. All this gloom and doom obsession at the altar of global warming will not produce one drop of alternative energy. And the environmentalist have much of the blame for their self-serving manipulation of the system.

[Always Independent]

Oh and by the way senator, how did you like that golf outing and room with a view? And Guys, the girls don't care if your a republican or democrat.

[Michael.SF.]

Refining capacity has been expanding for a decade

I always chuckle when someone like Boortz or Hannity complain about "No new refineries in 30 years" because it is an indicator that they do not know what they are talking about. Your link proves that.

If you don't mind, and for those who don't know, permit me elaborate on the numbers a bit:

1985 --- 15,671 KBPD refining capacity.
2004 --- 16,974 KBPD

Net increase 1,303 thousand Barrels per day.

Some definitions:

Small refinery -- 75 to 125,000 BPD
Med. refinery -- 126 to 225,000 BPD
LARGE refinery -- 225,000 and up BPD

Those are arbitrary numbers and others could easily dispute them and say I am too conservative on those estimates. But no one would argue that 200,000 BPD is a major refinery (i.e I believe that BP Arco Carson, calif., Valero Benicia, Calif. are in the 200-250 range).

The increase in the years mentioned is the equivalent of building 6 major refineries!!

[cibco]

You can do something about it. See my tagline.