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...around here we have a large refinery, shell oil, and they just sunk a stink pot full of money expanding it. we have a few smaller ones, valero and clark oil. amoco here just tore down in the last couple years about 50 to 100 tanks. don't know the reasoning behind it especially since there hasnt been a refinery built in the us since the early/mid 70's. perhaps to keep prices up with no supply but an increased or steady demand?...
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New EPA regs have been coming online and number of refineries are being torn down because they cannot meet them and stay profitable. If I understood it better, I could explain it better, but the guys and gals who work this have MSs and PHDs.
One of the things is stack emmissions (there are others too). The old federal theory use to be the bubble (if memory serves) which meant all the stacks in refinery were treated as one stack. You were certified for a certain amount of emmissions from the entire refinery.
Now each stack is licensed. Worse still it is very important to keep that stack operating or you will lose your license to emit.
Many of refiners are probably operating newer units elsewhere that can meet demands by adding capacity. That is likely easier and cheaper than getting a new license for an old plant that is going to need a potfull of money to put it into production.
Another factor are the new taxes coming online and that makes it harder to recover investment dollars.
A concept not many people have is the financial structure of Big Oil Companies. Outsiders see a Big Oil Company as a single bucket. They don't realize that they are looking at multiple buckets instead of just one.
Trying to keep it simple, there are two main buckets, upstream and downstream. "Upstream," are the groups that get the oil out of ground. "Downstream," are the groups that refine and get the oil products to market.
Upstream is financed differently or rather from a different bucket than downstream. Big Oil uses downstream kind of like a ATM for upstream projects. Upstream is both expensive and risky. Risk is spread across investors and if I recall, downstream fills in some of vacuum left over.
While you might think when Big Oil upstream has to dump its bucket somewhere, it would always be dumping that into Big Oil downstream. Truth is it really does, however, Big Oil downstream has to pay pretty much what Big Oil upstream could get for its product on the open market.
That may seem a little odd, but that is so all the investors (and stockholders) in Big Oil upstream drilling and projects (production) get their money back plus profit. Downstream has to make its profits on what it can sell its "manufactured" products to the end user for.
Downstream has another job to do for upstream. Upstream also goes through what I like to call "Feast or Famine." When oil prices are high they make big bucks, when they are low they are in the bread lines. These cycles can last for years. In the down years, downstream keeps enough capital flowing into upstream to keep it alive until market conditions change.
Its important to know how these things work. All companies, including Big Oil companies, pass on increased operating costs as much as possible. You as the end user what that playing field as level as possible and as competitive as possible.
since it also qualifys as a second home, he doesnt make out too badly.
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