The Grey Lady Cheers for Refineries!

The headline: No New Refineries in 29 Years? There Might Well Be a Reason should tip you off that this article is about to side with the President on his build new refineries initiative. Right off the bat let me say that if there was a real free market then regardless of regulations, there wouldn't be a shortage of refineries, (and their isn't a shortage of refineries anyway). In case you folks haven't been paying attention, refining isnt the problem, its the actual supply of crude oil that is the problem. No matter how you slice it, oil is a limited natural non-renewable resource, which the earth will someday cease to provide us with. This push for refineries is rediculous. If you were to embark on dergulating the refinery business. An industry that while kept shackled by the government regulations has somehow miraculously succeeded in turning a profit whilst achieving multitued of achievements on impacting our environment, taking over enourmous plots of land, polluting rivers, streams, lakes, fish, wildlife, birds, beasts, nature, air, oxygen, carbon dioxide, mercury, etc. Then go ahead and deregulate refineries. I can't wait!

Just think of the massive quantities of mercury that have yet to find their way into the fish we eat, the multitudes of Carbon Dioxide that have yet to be released into the air we filter via our cancer polluted lungs. Ahh! I can't wait to pay less at the pump for it!

Just think about the famous invisible hand and how deregulation of other industries like energy did to corporations like Enron!

This article is full of pity for the poor bastard who is trying to build a $2.5 billion, 1,400 acre refinery near the Mexican border (because why not share our pollution with our neighbors, they should get some of that fine quality air and water too no?). A refinery that somehow has cost this poor bastard 6 years of his life and a whopping $30 million already. I don't know about you but I don't know too many poor bastards who have $30 million and six years of life idly lying around. Either way if it takes 6 years and $30 million and ain't gonna generate a profit as the article states:

The business of turning crude oil into gasoline, jet fuel or heating oil has rarely been a lucrative proposition. It has dismal profit margins compared with its more glamorous cousin, exploration. It is highly cyclical and fairly unpredictable, because demand for gasoline swings sharply by season. And because of low oil prices over the past decades, refiners have been forced into cutthroat competition that has driven many of the smaller refiners out of business.

Then why are you still at it Mr. Mule?

The article goes on to portray statistics like mad about how our demand for oil will increase, how one day we will need to use half the oil we import as gasoline:

Over the last quarter-century, the number of refineries in the United States dropped to 149, less than half the number in 1981. Because companies have upgraded and expanded their aging operations, refining capacity during that time period shrank only 10 percent from its peak of 18.6 million barrels a day. At the same time, gasoline consumption has risen by 45 percent.

...

More refining capacity will almost certainly be needed. Gasoline demand is forecast to rise 39 percent by 2025, to 12.9 million barrels a day, up from today's 9.3 million barrels, according to a long-term outlook by the Energy Information Administration. By then, gasoline alone will account for nearly half the crude oil consumed in the United States.

By contrast, domestic refining capacity is expected to grow only by 0.8 percent from 2005 to 2007, slightly less than the 0.9 percent increase registered between 1998 and 2004, according to Jacques Rousseau, an oil analyst with the investment banker Friedman, Billings, Ramsey.

You will find great prospects for employment if refineries are built:

The prospect of a new employer, 3,000 construction jobs and 600 permanent posts has done a lot to outweigh concerns over the project, said John Nussbaumer, the mayor of Wellton, a city of 1,900 people about 20 miles from the refinery site.

You will even find a bullshit remark the $30 million poor bastard himself states that his purpose is the ever noble Rumsfeldian reasoning for his wasted dollars and time:

"Of course I am concerned about the effects on the environment," he said. "Would I rather see it somewhere else? Yes. Would I oppose it at this time? No. It's been too long since a new refinery was built in the United States. Anything we can do to reduce our dependency on the Middle East is a good thing."

Which of course taken on its merits, is a poor argument for building a refinery. First your refinery would refine oil that is imported mostly from the middle east. Second, if your refinery is going to increase the supply of gas, that would cheapen the price, leading to higher consumption which would require more importing of that Middle East oil! Asshat!

What you and I will not find in this puff piece for refinery builders is THE ACTUAL CAPACITY OF OUR CURRENT REFINERIES. You would think that an article making the case for the poor refineries and why there aren't going to be enough of them in the future planet of doom situation it portrays, would at the very least give you the current statistic of refinery capacity.

So Jad Mouawad (the reporter who wrote this poor excuse for journalism) here is the current capacity of the refinerying the heroin dealers Big Oil has 16.9 million bbl/d. In researching this little bit of information I came across this block of info from the US Energy Analysis Brief:

The United States experienced a steep decline in refining capacity between 1981 and the mid-1990s. Between 1981 and 1989, the number of U.S. refineries fell from 324 to 204, representing a loss of 3 million bbl/d in operable capacity (from 18.6 million bbl/d to 15.7 million bbl/d), while refining capacity utilization increased from 69% to 87%. Much of the decline in U.S. refining capacity resulted from the 1981 deregulation (elimination of price controls and allocations), which effectively removed the major prop from underneath many marginally profitable, often smaller, refineries.

Refinery closures have continued since 1989, bringing the total number of operable U.S. refineries to 149 in 2003. In general, refineries that have closed have been relatively small and have had less favorable economics than other refineries in their market area. Also, in recent years, some smaller, less-economic refineries that had faced additional investments for environmental reasons in order to stay in business found closing preferable because they predicted that they could not stay competitive in the long term.

While some refineries have closed, and no new refineries have been built in nearly 30 years, many existing refineries have expanded their capacities. As a result of capacity creep," whereby existing refineries create additional refining capacity from the same physical structure, capacity per operating refinery increased by 28% over the 1990 to 1998 period, for example. Overall, since the mid-1990s, U.S. refinery capacity has increased from 15.0 million bbl/d in 1994 to 16.9 million bbl/d in September 2004. Also in September 2004, utilization of operating capacity at U.S. refineries was averaging around 90%, down from 97% in July and August. Although financial, environmental, and legal considerations make it unlikely that new refineries will be built in the United States, expansion at existing refineries likely will increase total U.S. refining capacity in the long-run.

OOOPS! This industry is already deregulated (thanks to DA Gipper).

So in summary, the invisible hand is already ruling the refinerying business. If there are some permits this $30 million poor bastard with 6 years of his life he is having a hard time finding a use for, then file the fucking paperwork! It is more likely the invisible hand of Big Oil that is keeping you from refining all that Middle East Oil you want to make us independent from.

Not only that but the fact that we are currently at 16.9 of the supposedly 20 million bpd we need, and refineries have dropped their production capacity by 7 percentage points since July and August (all this is based on September data) perhaps if they reversed that little trend we could get a little more gas into our SUVs. Or if we delve a little deeper and actually use the figures reported by Jad here, and say that 9.3 million bpd, is our current gas need, and we be refining 16.9 million bpd, then we aint in such rough shape anyway!

If anything it will allow Mr. Mouawad (and the rest of the editors over there at the NYT) to get enough electrons running through his laptop into his favorite search engine and do some real research on this topic!