Refineries cut production to protect gasoline profits

[CatWoman]

Mike Malloy is discussing this story now.

Amazing.

Simply Amazing.

NEW YORK - Oil refiners cut fuel production in some states this week to counter slipping profit margins, drawing fire from critics already incensed by soaring gasoline prices and Big Oil's recent record profits.

San Antonio-based Valero Energy Corp., the nation's largest fuel producer, said Tuesday it slowed output from its refinery in Ohio by more than 10 percent for economic reasons, even as the company announced its 10th straight quarter of record earnings.

Earlier in the week, British energy giant BP slashed fuel production from its refinery in Whiting, Ind., by 10 to 15 percent because of lower profit margins in the region, market sources said. BP declined to comment.

U.S. gasoline prices averaged $2.34 a gallon Tuesday, nearly 50 cents higher than a year ago.

Oil refiners traditionally slow fuel production when profit margins fall into the red — something that happens when the cost of crude rises too high relative to the selling price of gasoline and heating oil.

http://www.chron.com/disp/story.mpl/business/3627131.html

[bbinacan]

1. This is totally fucked up. n/t

[RB TexLa]

2. Higher price doesn't mean higher margins

If you can keep your margins the same with higher raw product cost and higher retail cost then yes you make more money, but if your margins slip they slip regardless of the prices you are dealing with. They are not making any higher margins, infact I would bet they have been making smaller margins the last year and a half.

[CatWoman]

3. question

what fucking planet are you on??

[RB TexLa]

4. This one, sorry to bring none conspiracy thought into someone's rant

[xray s]

5. when you make the raw material you cash in either way

or are you saying these oil company profits being reported in the WSJ are just a figment of our overactive liberal imaginations?

I can see independent refiners getting squeezed, because they have to buy the oil on the open market. They aren't squirting it out of the ground. But BP?

Give me a break!

[RB TexLa]

6. no imagination needed to read profit reports

I said the margins, not the amount of profit. And people "squirt" oil out of my ground, they still have to pay me for it. And they pay me the market price for it. The oil that BP extracts from the North Sea doesn't have a private owner to pay but there are taxes paid on it per open market costs and much higher extraction costs due to the location.

[xray s]

11. "pay me for it"?

So who are you? God, or just the richest guy in the universe who owns the mineral rights to everything?

Or are we being graced with the Saudi royal family here at DU?

Sorry. You won't get any tears out of me for big oil.

They have been screwing the independent refiners for years. I do understand how independent refiners may have to cut production because they can't compete with the majors who make the profit on the crude and then put the squeeze on the indies. Once the indies fold the majors will come in for the kill on gasoline.

Upside; every 10 cent increase in gas prices = 1% drop in Bush/Republican poll numbers.

[RB TexLa]

13. pay what for you?

So who are you? God, or just the richest guy in the universe who owns the mineral rights to everything? Or are we being graced with the Saudi royal family here at DU?

None of the above


Sorry. You won't get any tears out of me for big oil.

Didn't ask for any

[Skip Intro]

15. so they aren't reaping record profits then?

explain it to me like I was a two year old

[RB TexLa]

16. I didn't say they aren't

I doubt you are a two year old and do not need to be spoken to as such, also I do not know any two year olds so I wouldn't know how they are spoken to anyway. :)

[LincolnMcGrath]

7. Yuh see, gas prices are high, uh, because of the treehuggers. Yeah!

K & R

[Sgent]

8. Also

BP can turn around and sell that oil on the open market rather than refining it.

[Ilsa]

9. Thanks for the link. I couldn't find it. Those damn bastards. eom

[CatholicEdHead]

10. Well, the markets expect even a larger profit next time

and they set the bar really high already.

[ariellyn]

12. Gas is higher because of the high temps this winter...

It has been so warm that all of the higher fuel costs that were supposed to happen didn't pan out. Gas was up from $2.25 to $2.50 in one day in the midwest. Amazing.

[UrbScotty]

14. Because as we all know, they are in dire straits right now

:sarcasm:

[ThoughtCriminal]

17. The classic RW argument on high gas prices

Is to blame enviromentlaists: "No new refineries built since 19xx"

They completely ignore:

1. Refining is only a small percentage of the cost of gas - most of the increase is from higher crude prices.
http://moneycentral.msn.com/content/Savinganddebt/Saveonacar/P98745.asp

2. Refineries have not been running at capacity.

3. The number of refineries has nothing to do with the capacity of those refineries. It's like saying that the U.S. population has not grown since 1959 since we have not added any new states.

[RB TexLa]

18. If new refineries were needed they would be built

The regulation argument is ridiculous. You have regulatory costs in building anything, refineries, apartment buildings, you name it. You weigh the costs and if you feel you will recoup them in an adequate time frame you pay them and build your building. It is my guess that the production savings from building a state of the art modern refinery would not return the costs of building them quick enough to satisfy the stockholders so they have not been built.

[sandnsea]

21. You could get the facts

but since we're guessing, I'm guessing (not) the reason is that refineries have already been expanded and upgraded with state of the art technology so we don't need any new refineries. I'm further guessing (again, not) that they're... gasp.. lying because they want an excuse to drill every last drop of oil no matter where it's at before they're forced to invest in the energies of the future.

[RB TexLa]

25. My only guess was on something they aren't going to say

They would rather have the regulations lowered to lower their cost of building them. They have tried to make an issue out of that and are going to hold that line to try to get what they want. That is their explanation of why there hasn't been new one built, I have chosen not to accept that. So I made a guess as to why the investment with the current regulatory price has not been made. As far as expansion and upgrading of older refineries, they have not upgraded all to the level of a newly built refinery. I would guess, and guess because I do not have the amount of education on industrial and engineering matters to know for certain, but a general knowledge of buildings and the advancements made in industrial building and codes to say that many refineries can not be completely modernized. If you look at the post below yours and the link you will see there were and probably will be safety issues with the maintenance of the equipment at the Texas City BP plant, some is a procedural problem with maintenance and once again with the previously stated educational limitations, in my belief probably increased by the equipment itself. I doubt it has been completely upgraded.

[Bridget Burke]

23. Yeah, and if the old refineries tend to blow up more....

The executives aren't the ones who get killed. Nor the stockholders.

From the Houston Chronicle:

IN the next few weeks, BP plans to restart its refinery in Texas City. If that statement spurs trepidation, it should. It was, after all, a restart of an isomerization unit at the plant on March 23 that turned the refinery into a deathtrap for 15 workers and left 170 others injured, some permanently....

The success of the maintenance operation, though, depends in large part on whether BP first undertook a different operation, a corporate surgery of sorts, to transplant its attitude toward safety.

Last week, BP grudgingly released two internal reports after months of hounding by the Chronicle and others. One was an audit conducted in the months after the March explosion. Another was a survey of employees done in the months before it.

The common theme is that BP failed to make safety a priority in Texas City. "Mainly, saving money gets rewarded, that is it," one worker wrote. "Safety is a pat on the back."

www.chron.com/disp/story.mpl/business/steffy/3491787.html

Got to keep those stockholders happy!

[Strelnikov_]

24. Actually, US Refinery Capacity Is Near Capacity At Peak Seasons

by design.

There was an article/press release by an organization that pointed out that many (100's?) of refineries have been closed over the last 30 years. The primary reasons were:

- Economies of scale. Fewer/larger refineries.

- More careful management of capacity due to consolidation in the industry. That is, there is no money to be made in having excess capacity.

Look at all the problems when Katrina/Rita knocked 10%+/- of the domestic refining capacity off-line. If it were not for foreign refined product stockpiles, there would have been physical shortages.

But, as you say, capacity has been added. Where do the Reich-Wingers think the ever increasing amount of refined product we use comes from? The Maximum Leader praying over barrels of gas and diesel?

[moondust]

19. Worked in California.

Take some production off line and profits will soar!!

[sandnsea]

20. but..but...but

we need more refineries and the liberals won't let us have them...whaaaaa...

What absolute FUCKERS.

[CatWoman]

22. LOLOLOLOL

Your'e funny!! :rofl:

I like that :rofl:

[tabasco]

26. But, but, but, oil company execs keep telling me ...

it's all that government red tape that keeps them from building more refineries and giving us all gas at $0.50 / gallon!

:shrug:

I've heard gullible republicans repeat that lie so many times.

I suppose it's all that red tape that prevented them from making record profits this year.

The bottom line is that the oil companies care about the welfare of this country as much as Enron.