Catch of the Day

misleading (0.00 / 0)

It's true that no new refineries have been built in decades - in fact the number of refineries has fallen by 50% since 1981, yet total output is up by 27%. That's because the remaining refineries have had their capacities increased and efficiencies improved by an amount equivalent to adding 20 new medium-sized refineries in just the last 10 years. Of course they don't want to build new ones - given all the regulations in place, it's a lot easier to expand existing ones. But the implication that refining capacity has gone down or that they WANT it to go down is misleading.

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by: Juan Melli @ Fri Apr 28, 2006 at 14:06:42 PM UTC

If that is all true... (0.00 / 0)

And I am not sure it is, then why, in 1994, did that gentleman give a talk at the big oil and gas conference that takes place every year and tell the oil companies that to preserve and grow profits, they had to reduce refineries and infrastructure and blame environmentalists in the bargain?

The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Fri Apr 28, 2006 at 14:40:15 PM UTC

[ Parent ]

If you don't believe it's true... (0.00 / 0)

then show me the real numbers.

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by: Juan Melli @ Fri Apr 28, 2006 at 14:44:40 PM UTC

[ Parent ]

Here's some... (0.00 / 0)

Real numbers. From Senator Ron Wyden(D-OR).

http://wyden.senate.gov/leg_issues/reports/wyden_oil_report.pdf

The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Fri Apr 28, 2006 at 19:56:40 PM UTC

[ Parent ]

his numbers say the same thing I said (0.00 / 0)

While oil companies were making agreements to control oil and gas supply, refineries were closing.  Since 1995, 24 refineries have closed, including refineries in California, Illinois, Arizona, Oklahoma, Indiana, Kansas, Louisiana, Texas, Mississippi, Michigan and Washington (the Tosco refinery has subsequently reopened), taking nearly 830,000 barrels a day of refining capacity offline. While capacity at some existing refineries expanded during this time, the fact is that more capacity would exist if these refineries were still operating.

I skimmed the document and nothing in it contradicts what I wrote:

“During the last ten years, overall refining capacity grew by about 1 to 2 percent a year as a result of expansion in the capacity of existing, larger refineries.  Although there was a significant, sustained improvement in margins during 2000, those gains arose out of a very tight supply situation and high volatile prices. Industry consolidation has been a key response to this poor profitability”

Do you have numbers that contradict what I said? If so, site them. Don't just throw documents at me.

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by: Juan Melli @ Fri Apr 28, 2006 at 20:22:23 PM UTC

[ Parent ]

Ok... (0.00 / 0)

Some selected quotes from a fuller treatment found here:

http://wakeupfromyourslumber.blogspot.com/2006/04/damning-evidence-of-big-oil-conspiracy.html

In his report, Senator Wyden made the following findings (abbreviated):

  * FINDING 1: Oil Companies Articulated their “Need” to Reduce Oil and Gas Supply to Increase Prices and Grow Profit Margins

  Not only did the oil companies view excess refining capacity as a financial liability, they openly suggested that eliminating the excess capacity and tightening supply would help improve their bottom line.

  [D]ocuments show that oil companies had the intent and motive to hamstring supply and reduce refining capacity. Subsequent events show that they acted [based on that intent].

  * FINDING 2: Oil Company Competitors Planned Opportunities to Subvert Oil and Gas Supply . . .

  “ARCO represents an important part of Tosco=s business. We want to do everything we can to nurture this important business relationship and make sure it keeps up the tradition of being mutually beneficial.”

  --Thank you note to ARCO Exec. VP James A. Middleton from Tosco CEO Thomas O’Malley, April 25, 1994

  “… explore whether or not there was any mutual benefit, any mutual interest, any profit for both ARCO and Tosco to find a way to have ARCO purchase or Tosco sell CARB [cleaner burning California Air Resources Board] gasoline to ARCO, recognizing that the agreement that was in place at that time did not provide for the supply of CARB gasoline.”

  --Summary of Deposition of William C. Rusnack, President of ARCO Products Co., taken May 15, 1997

  “And he, as I recall, confirmed their interest …and if we can reach a commercial agreement with them, that he felt, you know, this could change some of their investment decisions or change investment decisions of others on supplying CARB gasoline.”

  --Summary of Deposition of Cecil Blackwell, Senior Chevron Official, taken February 19, 1997

  * * *

  [M]ajor oil and gas companies supplying CARB gas to the California market entered into 44 supply-sharing agreements . . . to control the quantity of CARB gas on the market, reduce efforts to expand CARB refining capacity, limit imports of CARB gas and discourage excess CARB gas from being sold on the spot market to independent purchasers.

  Exxon, ARCO, Chevron, Shell, Texaco, Tosco and Unocal all entered into such supply-sharing agreements with at least one of their competitors.

You can find a whole lot more these and I am researching other sources.

The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Fri Apr 28, 2006 at 22:08:19 PM UTC

[ Parent ]

Here's some more from another Wyden Document: (0.00 / 0)

You can grab the full thing here:

http://wyden.senate.gov/leg_issues/reports/2004_ftcinaction.pdf

Refinery Closures Achieve Oil Industry Desire to Reduce Excess Refinery Capacity Internal oil industry documents show that during the 1990’s, industry officials looked to reduce refinery capacity in order to increase margins and boost profits. For example, in November 1995, an internal Chevron document revealed the concerns of a senior energy analyst at the API (American Petroleum Institute) convention that “If the U.S. petroleum industry doesn’t reduce its refining capacity, it will never see any substantial increase in refining margins.”23 A few months later, an internal Texaco document warned that “[a]s observed over the last few years and as projected into the future, the most critical factor facing the refining industry on the West Coast is the surplus refining capacity, and the surplus gasoline production capacity. The same situation exists for the entire U.S. refining industry.”24

  In at least one case, oil company documents show a deliberate oil industry strategy to tighten gas supply and drive up prices and oil company profits by keeping a refinery off-line. An internal oil company document revealed efforts to prevent the restart of the Powerine refinery in Southern California because an oil company official feared that its restart would reduce gas prices and refinery profits by two to three cents per gallon. In the document, this official writes: “We would all like to see Powerine stay down. Full court press is warranted in this case.”25 18 EIA Annual Energy Review, 2002, Table 5.9 “Refinery Capacity and Utilization, 1949-2002” 19 Shell To Close Bakersfield Refinery, Optimize Regional Refining Network (Shell Press Release dated November 13, 2003). 20 Total based on EIA Annual Report, Vol. 1, Years 1995-2002; 2003 data from Mike Connor, EIA Analyst by phone, April 20, 2004. 21 EIA Annual Energy Review, 2002, Table 5.9 “Refinery Capacity and Utilization, 1949-2002” 22 EIA Annual Energy Review, 2002, Tables 5.12a, 5.12b, 5.12c, 5.12d, “Petroleum Consumption (Motor Gasoline Data) 23 Internal Chevron Document, November 30, 1995. 24 Internal Texaco Document, March 7, 1996. 25 Internal Mobil Corp. email, February 6, 1996.

The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Fri Apr 28, 2006 at 22:14:58 PM UTC

[ Parent ]

And there is just one more: (0.00 / 0)

A press release from here:

http://www.consumerwatchdog.org/energy/pr/?postId=6133

New Gasoline Study Shows Profits, Not Crude Oil Prices Or Ethanol, Are Driving Pump Price Spike

Santa Monica, CA -- The Foundation for Taxpayer and Consumer Rights released a new study today of rising gasoline prices in California that found corporate markups and profiteering are responsible for spring price spikes, not rising crude costs or the national switchover to higher-cost ethanol, as the oil industry claims.

Click here to download and read the study.

Independent petroleum consultant Tim Hamilton analyzed gasoline price increases from January to April to find that:

  * Increases in the "spot" market price of crude oil -- which is the highest price a major oil company would pay for crude oil -- accounted for only 12 cents per gallon. California's percentage sales tax increased fuel prices by another four cents per gallon. More than 40 cents of the 60-cent increase in gasoline prices over 3 1/2 months is attributable to increased refinery and marketing profit margins for the oil companies;
  * Neither the MTBE phaseout nor the substitution of ethanol is a serious part of the increase. If the MTBE phaseout or ethanol blending specifically increased costs for oil companies in California, other states in the West using conventional unblended gasoline should be much less affected. Yet Washington State, which uses only conventional gasoline and has similar refinery capacity and crude oil sources, mirrored California's increase;
  * The profit increase of 42 cents, on top of record profits last year, means California gasoline will cost consumers approximately $546 million more in April 2006 than in April of last year.

"While oil companies continue to blame crude oil prices and ethanol additives for the recent gasoline price spikes in California, the chief cause is increased profiteering by oil companies that have previously posted world record profits," said Hamilton.

"Oil companies are opportunistically using the rising world price for crude oil as an excuse to excessively raise gasoline prices and pump up their profits, even though the spot market price for crude has gone up far more slowly than gasoline prices," said FTCR President Jamie Court. "In addition, the spot price is higher than most oil companies pay, since they either harvest their own crude or pay more stable and often much lower contract prices.

"This study should be a wake-up call for California voters who will vote in November on a ballot initiative to tax windfall profits by oil companies so the state can develop alternatives to the petroleum economy."

While I am not skeptical about either the existance of peak oil's existance or that the issue looms, I do find it more than a bit interesting and facile that it is all of a sudden a big issue now, while we are trying to militarily dominate the richest oil region on earth. In my checkered past(actually the checkered past of my late father), I was able to see some of the tactical creativity(heh) of the oil patch. Once one has seen that, one remains forever skeptical, at best. At worst, one wears a cloacal chastity belt as a good defense.


The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Fri Apr 28, 2006 at 22:28:21 PM UTC

[ Parent ]

still (0.00 / 0)

You still haven't shown me anything that contradicts what I said. I'm waiting for you to show me numbers saying that refining capacity has decreased. I don't think they do, but if you find them, let me know.

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by: Juan Melli @ Fri Apr 28, 2006 at 22:35:47 PM UTC

[ Parent ]

Ok. (0.00 / 0)

3. The mergers in the oil industry over the last few years and the closing of
many refineries over the past twenty years have increased concentration in
the refining industry. In some states, the refining and marketing industry
for gasoline is highly concentrated; in many states it is at least moderately
concentrated.
A large number of mergers and acquisitions in the oil industry in recent years has led
to a significant consolidation of refining assets.
• In 1998, Marathon and Ashland Oil merged their downstream assets.
• In 1998, British Petroleum (BP) merged with Amoco
• In 1999, Exxon Corporation merged with Mobil Corporation.
• In 2000, BP/Amoco acquired ARCO.
Within the past year –
• Shell acquired Texaco’s domestic downstream assets;
• Chevron, which had acquired Gulf Oil in 1994, acquired Texaco (other than
downstream assets);
• Phillips acquired Tosco;
• Phillips announced a merger with Conoco;
4
• Valero acquired Ultramar Diamond Shamrock (UDS).
This wave of mergers has followed a general consolidation of assets within the refining
industry over the past two decades. In 1981, 189 firms owned a total of 324 refineries; by 2001
65 firms owned a total of 155 refineries, a decrease of about 65 percent in the number of firms
and a decrease of about 52 percent in the number of refineries. During this period the market
share of the ten largest refiners increased from 55 percent to 62 percent.
As a result of this consolidation, in a number of regions, states, and cities across the
country the wholesale and retail markets for gasoline in the United States are moderately to
highly concentrated. In 2000, as measured by the Department of Justice/Federal Trade
Commission guidelines for evaluating mergers, the gasoline wholesale market was “moderately
concentrated” in twenty-eight states and “highly concentrated” in nine. According to the fourfirm
concentration ratio, which is another standard measure of market concentration, the
wholesale market is a “tight oligopoly” in twenty-eight states (including the District of
Columbia).
4. Over this same time period, the balance between supply and demand has
become “tight.”
Because of the decline in the number of domestic refineries, total domestic refining
capacity is slightly lower now than it was twenty years ago. At the same time, demand has
increased. As a result of these trends, at present supply and demand are very closely balanced.
This is sometimes referred to as a “tight” market.
In 1981, when the number of refineries was at its highest, capacity utilization was at its
lowest. Just over 68 percent of refining capacity was being used, meaning that nearly one-third
of all domestic capacity was idle. During most of the 1980s and into the early 1990s

http://www.senate.gov/~gov_affairs/042902gasreport/sectioni.pdf

The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Fri Apr 28, 2006 at 22:45:56 PM UTC

[ Parent ]

what? (0.00 / 0)

I don't understand what point you're trying to make. Nothing in there says that refining capacity has decreased.

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by: Juan Melli @ Fri Apr 28, 2006 at 22:57:28 PM UTC

[ Parent ]

Yes it does. (0.00 / 0)

right in there and in the document, forward, and they have been somewhat subtle, too, to keep the refinery capacity "tight", to keep prices high. Add to that "just in time" techniques in delivery of finished products...well, you got *some* of what you got now.

The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Fri Apr 28, 2006 at 23:29:03 PM UTC

[ Parent ]

still no (0.00 / 0)

I never said capacity wasn't tight. It's about where it was in the 70s and a little higher than in the 80s.

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by: Juan Melli @ Fri Apr 28, 2006 at 23:46:10 PM UTC

[ Parent ]

It might be more subtle than straight contradiction. (0.00 / 0)

Oil Giants Planned to Manipulate Gas Prices, Memos Reveal
by Brendan Coyne

Jessica Azulay (about) contributed to this piece.

Three major companies each discussed strategies for manipulating pump prices and profit margins long before the current “crisis,” adding fuel to the fire raging over suspicion of present-day maneuvering and gouging.

Sept. 8, 2005 – As oil prices rose over the last several years, some domestic oil companies decided to reduce output, causing prices to spike even higher, according to internal memos from three major fuel companies released yesterday by a consumer watchdog organization.

Yesterday, The Foundation for Taxpayer and Consumer Rights (FTCR), a California-based consumer watchdog, published corporate memos showing a purposeful effort to reduce domestic gasoline production on the part of three major oil companies: Mobil, Texaco and Chevron.

As previously detailed by The NewStandard, organizations keeping an eye on the oil industry have insisted that the recent rise in gasoline costs is due, in part, to an intentional effort by oil companies to keep prices high and profit margins wide.

"Large oil companies have for a decade artificially shorted the gasoline market to drive up prices," FTCR President Jamie Court said in a press statement. "Oil companies know they can make more money by making less gasoline."

http://newstandardnews.net/content/index.cfm/items/2336

Heading over to FTCR now. More to come.

The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Fri Apr 28, 2006 at 23:58:24 PM UTC

[ Parent ]

A wealth of info. (0.00 / 0)

http://www.consumerwatchdog.org/energy/gasprices/

The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Sat Apr 29, 2006 at 00:00:45 AM UTC

[ Parent ]

At this point (0.00 / 0)

You should write a diary about what you've found.  It's a bit much to deal with in comments.

XT

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by: Thurman Hart @ Sat Apr 29, 2006 at 03:46:02 AM UTC

[ Parent ]

point taken (0.00 / 0)

I know what you said here is true. I didn't mean to imply that they are rubbing their hands for reduction in capacity.

Bush is the one implying that refining capacity has gone down.

The idea simply an assinine on its surface.

If in fact refining capacity was a problem, why wouldn't big oil take some of those billions and expand capacity. Its just tanks and plumming and real estate (as you pointed out above).

This is just stupid. Why would big oil want to hobble itself from making money when it is reaping all these profits?

Jmelli, is it time to write about this myth (just like that gas gouging myth you wrote about earlier)?

Media In Trouble

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by: Media In Trouble @ Fri Apr 28, 2006 at 14:40:43 PM UTC

[ Parent ]

is this a pervasive myth? (0.00 / 0)

If so, people need to get their heads out of the sand. This isn't a blog about the realities of the oil industry, but if our representatives start making similar claims, I'll make sure to clue them in.

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by: Juan Melli @ Fri Apr 28, 2006 at 14:50:49 PM UTC

[ Parent ]

Bush... (0.00 / 0)

has been putting up the refining capacity straw man forever.

Media In Trouble

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by: Media In Trouble @ Fri Apr 28, 2006 at 16:28:48 PM UTC

[ Parent ]

I would suggest... (0.00 / 0)

You read the collected bloggish works of Raymond J. Learsy, over at HuffPo and the website "Energy Bulletin" for some things regarding the energy industry that never seem to find their way into the pages of the MSM.

Both Learsy and EB seem to be The Real Deal.

The nom de plume has a long and distinguished history.

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by: Tandalayo Scheisskopf @ Fri Apr 28, 2006 at 22:18:51 PM UTC

[ Parent ]