My personal musings about anything that gets on my radar screen--heavily dominated by politics.


Energy Thoughts

I'm just going to pull a few choice quotes out of this morning's NYT article called "No New Refineries in 29 Years? There May Be A Reason", and let you draw inferences and conclusions for yourself.

About 100 miles southwest of Phoenix, in a remote patch off Interstate 8, Glenn McGinnis is seeking to do something that has not been done for 29 years in the United States. He is trying to build an oil refinery.

Part of his job is to persuade local officials and residents to allow a 150,000-barrel-a-day refinery in their backyard - no small task. Another is to find investors ready to risk $2.5 billion in a volatile industry. So far, the effort has consumed six years and $30 million, with precious little to show for it. . .

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. . .

Part of the issue, according to refiners, is that substantial investments were made over the last decade to lower carbon emissions and meet low-sulfur fuels regulations. The American Petroleum Institute estimates the industry invested $47 billion on such investments. More investments will be needed through 2007 to clean up gasoline and diesel.

"This is going to cost you money and the only thing you will get is cleaner air and less emissions - which are good - but no new capacity,"

Kinda makes you wonder why Mr. McInnis doesn't just move his refinery a couple hundred miles to the south, were he might have a chance to be operational some time this decade. Those numbers suggest to me that getting this plant going should be a reasonably profitable venture.

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