Skip to comments.For some refiners, the price of gasoline is too low
Posted on 03/29/2012 5:17:40 AM PDT by thackney
Rising gasoline prices have become a source of finger-pointing and political rhetoric yet the economic reality for some refiners is that the price isnt high enough.
They say that gasoline prices, particularly on the East Coast, have been too low for them to operate successfully. Already, two refineries there have shut down completely and a third has gone idle as prices for fuel havent kept up with the surging cost of the raw material, crude oil.
In an environment like this, where the price of crude oil is rising faster than the price of the product that the refineries make, the profits get squeezed, and in some cases theyre not profits at all, said Bill Day, a spokesman for San Antonio-based Valero, the nations largest refiner.
High world oil prices and declining U.S. demand for gasoline have been a major part of the problem, said Charles Drevna, president of American Fuel & Petrochemical Manufacturers.
The result has been lower domestic gasoline production in regions where refineries rely on imported crude. Oil sold globally is more expensive than crude that is produced and refined in parts of the country with limited access to the world market.
Brent crude, used as a benchmark for world oil, closed Wednesday at $124.16 per barrel, down $1.38. West Texas Intermediate, the U.S. benchmark, closed at $105.41, down $1.92.
On the East Coast, where refiners rely on foreign crude, production dropped from 93 percent of capacity in 2005 to 63 percent in 2011 because of high world oil prices, according to the U.S. Energy Information Administration.
Nationwide, refineries are running at an average of 82 percent of their fuel-production capacity, according to the agency.
(Excerpt) Read more at fuelfix.com ...
When crude oil prices are high, refineries tend to make less money.
Oil producers make a more money when oil prices are high. Nearly all use that time to build more infrastructure and produce more oil, which will lower prices, barring other changes.
Cant they just use Algae instead of Oil?? Their President says they can.
It is supply and demand. The price of crude is higher than the demand for refined gasoline. Therefore, the refineries cannot get profits on a retail level if they want to sell their product. This is a good sign. Current gas prices are not sustainable in this market.
And those purchases are largely where the gas stations make their profits.
After his election he’ll have more flexibility to deal with borrowing, spending, and putting America in it’s place.
Seems a perfect time to short
Post this story next to the one where baseball team owners claim to lose money every year.
$5.52 for a US gallon in my town this morning. And we’re not the most expensive place in Canada. It’s soon coming to a gas station near you. Canada is America’s canary in the coal mine. Look and learn. What liberal outrage happens here today is going to happen in America tomorrow.
I have a hard time figuring that claim out.
The price of crude is due to supply of it across the demand for the refined products including gasoline.
Therefore, the refineries cannot get profits on a retail level if they want to sell their product. This is a good sign.
What I see happening is that old, less updated refineries and those in a high labor price market find the tight margins too difficult to stay in business when faced with a falling US demand.
A few refineries have shutdown without being sold.
Can you name a ball team that has done this?
Also, we have more than one Major Oil company getting out of the refining business to concentrate more on producing crude oil and natural gas. Marathon did this last year.
ConocoPhillips split puts another dent in Big Oil model
ConocoPhillips announcement Thursday that it will split into separate refining and exploration-production companies heralds a new era for the Houston oil giant and offers another sign that the all-in-one business model oil majors have preferred for years may be falling out of favor.
ConocoPhillips, the nations third-largest oil company, is the latest to sharpen focus on oil and gas production by selling refineries or spinning off refining businesses altogether. And it may not be the last.
Check out The Bears Explain The Price Of Gas if you want a good run down on the real reason why prices are going up and refinery margins are going down.
I wonder if we will start importing unleaded gasoline from China from a refinery off the coast of Brazil?
EPA and other government overhead cost disappear if the gas is refined outside of the USA.
Cushing to Gulf Coast bottleneck.
What is paid for the resids in Cushing?
On the GC, Louisiana Sweet is $127, $22 more than WTI.
That bottleneck is not going to last.
Natural Gas is starting to live through oil’s Dec 1998. I believe it will be far worse for them by early fall this year.
This is a typical nonsensical Daily Mail UK headline, but the story is something we may be facing in the near future.
Now police force orders petrol stations to CLOSE:
Total chaos as ministers tell drivers to top up when their tanks are half full