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Refinery outages = market manipulation?
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threadbear
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PostPosted: Sat May 19, 2007 11:08 pm    Post subject: Re: Refinery Outages and Pipeline Problems Add User to Ignore List Reply with quote

Rawtorque wrote:
I think they're making plenty of margin. And some companies, like Valero, adapted many of their refineries to use sour crude. Yes, it costs more to refine, but it sells for a discount.

Here in California, the cost of gasoline is 30-50 cents more per gallon. Yet, experts have said for over a decade the reformulated gas costs only 5-15 cents more to make. Many of the reformulation items, like reducing benzene & butiedine in gasoline, make sense since they're carcinogenic. Lower Reid Vapor pressure gasoline reduces both evaporation losses and vapor locking.

Then, some news from the past:

Wall Street Journal
June 15, 2001

Internal Memos Show Oil Firms Worked To Cut Refinery Output
to Raise Profits

Associated Press

WASHINGTON -- Even as the Bush administration cites a lack
of refineries as a cause of energy shortages, oil industry
documents show that five years ago companies were looking
for ways to cut refinery output to raise profits.

The internal memos involving several major oil companies were released Thursday by Sen. Ron Wyden (D., Ore.), whose office obtained them from a whistleblower. He said the materials did
not necessarily reflect any illegal activities but said some of
them "sure look very anticompetitive."

Tight gasoline supplies have been cited repeatedly by the
industry and the White House as a primary reason for soaring gasoline prices this year.

Mr. Wyden was turning the material over to the Governmental Affairs Committee, which plans hearings on oil industry practices and energy prices.

Red Cavaney, the president of an industry trade group, said,
"This finger pointing six years into the past serves no useful purpose."

While pump prices have eased recently, the cost of gasoline
jumped an average of 31 cents a gallon nationwide during the seven weeks ending in mid-May (2001), according to
government figures presented at a House hearing Thursday.

Because it takes about four years to build a large refinery,
planning for a new plant would have had to begin by the mid-1990s, energy experts say. There has not been a new
refinery build in the United States in 25 years; in the
meantime, dozens of small ones have closed.

The documents obtained by Mr. Wyden's office suggest that in
the mid-1990s oil companies had no interest in building
refineries because of low profit margins. In fact, companies
were discussing the need to curtail refinery output in
order to make more money, the documents suggest.

"If the U.S. petroleum industry doesn't reduce its refining
capacity, it will never see any substantial increase in refinery margins [profits]," said an internal Chevron Corp. document
in November 1995, citing views presented by participants at
an American Petroleum Institute conference.

A year later, an official at Texaco Inc., in a memo marked
"highly confidential," called concerns about too much
refinery capacity "the most critical factor" facing the refinery industry. Excess capacity is producing "very poor refining
financial results," the memo said.

Mr. Wyden said the documents "raise significant questions
about whether America's oil companies tried to pull off a
financial triple play, boosting profits by reducing refinery
capacity, tagging consumers with higher pump prices and
then arguing for environmental rollbacks."

The institute produced statistics showing refinery capacity
has increased since 1996 as refineries became more efficient
and some expanded. The figures also showed capacity
increasing slower than demand.

Mr. Cavaney, the institute's president, said the industry's
reluctance to invest in new refinery capacity when profit
margins are low and supplies are adequate -- as was the case
in the mid-1990s -- was "a normal response in a commodity
market."

Mr. Wyden singled out a 1996 memo from Mobil Corp., which
has since merged with Exxon to create Exxon Mobil Corp.,
that suggests that Mobil was ready for a "full court press" to
make sure an independent California refinery, which had
closed in 1995, would not reopen.

At the time, Mobil was concerned that if the refinery, owned by
the Powerine Oil Co., resumed production it might force down
the price of a special, cleaner burning gasoline by as much as 3 cents. "Needless to say, we would all like to see Powerine stay down," the memo said. "Full court press is warranted in this
case." The refinery remained closed.

Texaco spokeswoman Keelin Molloi said Mr. Wyden's allegations "divert attention away from legitimate policy questions" about energy needs.

As for the 1995 Texaco memo, she said, "Within any company, discussions about the margins and capacity are conducted in a normal course of business and in no way constitutes
inappropriate or illegal behavior."

Chevron spokesman Fred Gorell said the company "flatly denies
any improper conduct involving refinery production levels or
gasoline pricing."

Attempts to reach ExxonMobil were unsuccessful.

The need for more refinery capacity has been the focus of
President Bush's energy plan. Vice President Dick Cheney has blamed gasoline prices increases on tight supplies caused in large part, he contends, because the last new U.S. refinery was built in 1976.

In fact, 24 refineries -- many of them small independents -- have shut down since 1995, according to the Energy Department.
That has accounted for the loss of 831,000 barrels a day of
refining capacity. Individual refinery expansions at the same
time have added 1% to 2% of capacity annually.


And that was 2001! Mobil was sweating a 3 cent per gallon
loss? Rolling Eyes


You can quote even the most conservative sources until you're blue in the face and these bunch of doofuses will still end up playing the role of apologist for big oil. But post away, it's refreshing to see reality, poke it's head through the haze of obscure, panty waisted, shrill denial.
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PostPosted: Sat May 19, 2007 11:16 pm    Post subject: Re: Refinery Outages and Pipeline Problems Add User to Ignore List Reply with quote

AirlinePilot wrote:
Conspiracy theories dont belong in these threads. They should be taken over to the open forums with the rest of the 9/11 tripe.

I thought this thread was for pipeline and refinery issues?


Yadayadayada. Time to hit the hay, you've got another big day of propagandizing coming up tomorrow.

Did you bother to read the newspaper article another poster was kind enough to dredge up for you, to disabuse you of the notion that every price hike is directly related to peak oil?
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PostPosted: Sat May 19, 2007 11:31 pm    Post subject: Re: Refinery Outages and Pipeline Problems Add User to Ignore List Reply with quote

threadbear wrote:
Did you bother to read the newspaper article another poster was kind enough to dredge up for you, to disabuse you of the notion that every price hike is directly related to peak oil?


Yup.

I never made any such claim about gas or crude price rises. While its likely a few cents of each weekly rise we see(lately) is due to some form of gouging, the crux of the problem remains one of inventory and refinery problems which appear to be directly related to issues surrounding light sweet crude production decline. I find far more evidence from many others here that leads me to this belief rather than some form of giant government/industry plan to rake in profit based on faux PO.
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PostPosted: Sun May 20, 2007 12:15 am    Post subject: Re: Refinery Outages and Pipeline Problems Add User to Ignore List Reply with quote

AirlinePilot wrote:
threadbear wrote:
Did you bother to read the newspaper article another poster was kind enough to dredge up for you, to disabuse you of the notion that every price hike is directly related to peak oil?


Yup.

I never made any such claim about gas or crude price rises. While its likely a few cents of each weekly rise we see(lately) is due to some form of gouging, the crux of the problem remains one of inventory and refinery problems which appear to be directly related to issues surrounding light sweet crude production decline. I find far more evidence from many others here that leads me to this belief rather than some form of giant government/industry plan to rake in profit based on faux PO.


Who said anything about faux peak oil? The price of oil right now is one part peak and 2 parts manipulation. You either/or types confuse me. I tell you what Airline Pilot. If I'm right, oil is going to go back down again into the low 50's per barrel, as the oil companies realize they're looking at paying windfall profits taxes if and when the democrats regain more power. (say 2008) If you're right, there's an immediate hellacious problem and it should keep skying, even if there's an economic meltdown and demand destruction.

I'll bet you a ten dollar petrodollar bill that I'm right.
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PostPosted: Sun May 20, 2007 12:49 am    Post subject: Re: Refinery Outages and Pipeline Problems Add User to Ignore List Reply with quote

threadbear wrote:
AirlinePilot wrote:
threadbear wrote:
Did you bother to read the newspaper article another poster was kind enough to dredge up for you, to disabuse you of the notion that every price hike is directly related to peak oil?


Yup.

I never made any such claim about gas or crude price rises. While its likely a few cents of each weekly rise we see(lately) is due to some form of gouging, the crux of the problem remains one of inventory and refinery problems which appear to be directly related to issues surrounding light sweet crude production decline. I find far more evidence from many others here that leads me to this belief rather than some form of giant government/industry plan to rake in profit based on faux PO.


Who said anything about faux peak oil? The price of oil right now is one part peak and 2 parts manipulation. You either/or types confuse me. I tell you what Airline Pilot. If I'm right, oil is going to go back down again into the low 50's per barrel, as the oil companies realize they're looking at paying windfall profits taxes if and when the democrats regain more power. (say 2008) If you're right, there's an immediate hellacious problem and it should keep skying, even if there's an economic meltdown and demand destruction.

I'll bet you a ten dollar petrodollar bill that I'm right.


Threadbear, how was it that you discerned any real meaning from AirlinePilot's post? I just read arrogance and confusion.
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PostPosted: Sun May 20, 2007 9:17 am    Post subject: Re: Refinery outages = market manipulation? Add User to Ignore List Reply with quote

I agree very nearly with pup55 and airline pilot, and since they stated their position well, there is not much to add.

According to Department of Energy statitics, the quality of crude imported into the US has been slipping steadily and consistently since after 2003. So things really started changing in 2004, peak oil or not. I strongly suspect that refiners for the first year ran through all the good stuff (light sweet crude) first. Then about 2005, even though a few refiners had the foresight to shift some operations to handle heavier crude, refiners started falling behind the quality change. Hurricane Katrina was a mixed blessing – it took a lot of refiners offline, but gave some a chance for an extended upgrade of their systems.

However I suspect in addition to bad luck (one refinery was struck by lightning and put out of commission in the middle of a Philadelphia winter), refiners failed to properly estimate the wear and tear of running more complex and stressful systems to handle the lower quality crude.

So yes, refiners have some mistakes – but are they intentional? I don't see them as making any more mistakes than any other industry.
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PostPosted: Sun May 20, 2007 10:11 am    Post subject: Re: Refinery outages = market manipulation? Add User to Ignore List Reply with quote

<has TB's back all the time> Cool
The truth is that NOTHING has to be any ONE WAY and could easily be and probably is a combination of these as well as many other factors.
I think its a FN shame that some of the otherwise brightest minds cannot come out of their unimaginative shell in order to take a good look above ground as well as below.

No matter what Einstein said about imagination as he was not really that intelligent anyways or he would have never given you stupid monkeys the big bang baby Cool

The very rigid and narrow viewpoints on display here could be equated to viewing the world through the eye of a needle.
Quite sad really...

Have they been caught cheating? Yes.
Are they cheating currently? Probably.
Will it matter when the price is $10 a gallon? No.
Would most politicians find the Will to go against them if it was concluded that they are cheating? Very Doubtful.
Will most people be able to "alter" their driving habits to seriously reduce consumption? Doubtful.

Will any of this matter if this is how TPTB want it to be? No.

Oil has peaked.
There is less and less SLC to go around.
The price needs to be high.
Demand destruction needs to occur.
The entire first worlds global economy needs to recede and then depress.
Populations must reach zero or negative growth rates.

and now I will pretend I am one of the globalist elite:

We own everything, Money is an Illusion.
We control everything, War is a Manipulation.

There exists only what we are doing and what must be done to preserve whatever it is we are doing.

10% of us control pretty much everything so let us strive to maintain normalcy for our 10% and screw the rest...

What? Wrong thread? I seriously do not think so.

What it must be like to see the world in only grey, black and white...

They are afraid that you the small minded one will not be able to see beyond "conspiracy" to understand that PO is reality.

They are afraid that the commoner will seize upon even the tiniest shred of doubt and use that to go deeper and deeper into denial which en masse will create the Post peak oil nightmare that so many envision...

Are you that stupid?
Are you that narrow minded?

A good piece of bullshit comes out and they go "Yay!".
A bad piece of bullshit comes out and they go "Boo!".

I for one will no longer cheerlead either side but instead make up my own mind.
What will you, the reader who never posts, do?
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PostPosted: Sun May 20, 2007 11:21 am    Post subject: Re: Refinery outages = market manipulation? Add User to Ignore List Reply with quote

DantesPeak wrote:
I agree very nearly with pup55 and airline pilot, and since they stated their position well, there is not much to add.

According to Department of Energy statitics, the quality of crude imported into the US has been slipping steadily and consistently since after 2003. So things really started changing in 2004, peak oil or not. I strongly suspect that refiners for the first year ran through all the good stuff (light sweet crude) first. Then about 2005, even though a few refiners had the foresight to shift some operations to handle heavier crude, refiners started falling behind the quality change. Hurricane Katrina was a mixed blessing – it took a lot of refiners offline, but gave some a chance for an extended upgrade of their systems.

However I suspect in addition to bad luck (one refinery was struck by lightning and put out of commission in the middle of a Philadelphia winter), refiners failed to properly estimate the wear and tear of running more complex and stressful systems to handle the lower quality crude.

So yes, refiners have some mistakes – but are they intentional? I don't see them as making any more mistakes than any other industry.


REad Rawtorque's post again, read the oligopoly link I posted and get back to us.
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PostPosted: Sun May 20, 2007 12:06 pm    Post subject: Re: Refinery Outages and Pipeline Problems Add User to Ignore List Reply with quote

pup55 wrote:
Quote:
LIHOP


One more thing on this.....

If by "lihop" you mean "deliberately not expand and maintain the refinery system so as to create an artificial shortage" I disagree. If by "lihop" you mean "delibrately make a series of investment/non investment situations so as to maximize their own short term income" I agree completely.


Me too, and I'm not trying to drag this into conspiracy theory territory at all, as my previous post stated. threadbear happened to use the words "Let It Happen On Purpose," which is 9/11 CT jargon - I was making light of that, although perhaps it was intentional on threadbear's part.
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PostPosted: Sun May 20, 2007 12:27 pm    Post subject: Re: Refinery outages = market manipulation? Add User to Ignore List Reply with quote

DantesPeak wrote:
According to Department of Energy statitics, the quality of crude imported into the US has been slipping steadily and consistently since after 2003. So things really started changing in 2004, peak oil or not. I strongly suspect that refiners for the first year ran through all the good stuff (light sweet crude) first. Then about 2005, even though a few refiners had the foresight to shift some operations to handle heavier crude, refiners started falling behind the quality change. Hurricane Katrina was a mixed blessing – it took a lot of refiners offline, but gave some a chance for an extended upgrade of their systems.
That is the data I needed to convince me that yes indeed, we are fubar with no hope of redemption.

This supports Stuart's latest Oildrum article. He shows that North Ghawar, the source of Arab light is depleting quickly and that the two southern sections Hawiyah and Haradh (recently brought back on line) are flooding the world with sour heavy crude, much of which comes here to the US.

Stuart has also shown these two sub-fields are not pumping fast enough to compenstate for Shedgum and Uthmaniyah's decline. Considering that KSA is among our major suppliers, I can see the direct implications. Can you?
DantesPeak wrote:
However I suspect in addition to bad luck (one refinery was struck by lightning and put out of commission in the middle of a Philadelphia winter), refiners failed to properly estimate the wear and tear of running more complex and stressful systems to handle the lower quality crude.
or the stress that crude sour petroleum imposes on the refineries. It corrodes the pipes, the sulfur must be dealt with, the equipment cleaned etc.

DantesPeak wrote:
So yes, refiners have some mistakes – but are they intentional? I don't see them as making any more mistakes than any other industry.
It is really unnecessary to create a conspiracy that a much simpler explanation offers. There is too much heavy sour in the world and not enough light. The United States stopped investing in refineries 35 years ago when we peaked. And not only is future petroleum heavy, dirty, and far away, but it flows too slow and requires energy-intensive processing that in the final analysis steals even more energy from the greater society.
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PostPosted: Sun May 20, 2007 12:31 pm    Post subject: Re: Refinery outages = market manipulation? Add User to Ignore List Reply with quote

Quote:
A year later, an official at Texaco Inc., in a memo marked
"highly confidential," called concerns about too much
refinery capacity "the most critical factor" facing the refinery industry. Excess capacity is producing "very poor refining
financial results,


I just had to comment on this....

Of COURSE in the late 90's and even early this decade, the companies were thinking about shutting down capacity. They were not making any money! They are not under any sort of obligation whatsoever to keep a refinery running if they are not getting a return on their capital. In this case, it was risk on the upside that they were weighing....If they had really shut down the capacity, they would be losing the opportunity to profit in the event of a market upsurge, which is exactly what happened.

Excess capacity sucks in money and spews out nothing in return. The companies would prefer to have as little buffer as possible. Under the capitalistic system this is the way these businesses are supposed to be run. It would have been irresponsible of them to allow too much excess capacity to remain open. One need only look at what happened to the US auto industry as an example of what happens to a company or industry who refuses to bite the bullet and close down plants when they do not produce an acceptable rate of return.

Quote:
which
has since merged with Exxon to create Exxon Mobil Corp.,
that suggests that Mobil was ready for a "full court press" to
make sure an independent California refinery, which had
closed in 1995, would not reopen.


This is going right up to the line. A lot of these companies in all sorts of industries try to influence local regulators to cut them some slack, or do various other things to keep their competition off their backs. One need only look at Microsoft as an example of a company that does this all the time. Wallymart has become a master of this sort of thing. When they cross over the line is if they pay bribes to officials to keep a competitive plant from opening. They are right up to the line again if they give a "campaign contribution" to somebody that has the power to influence this.

Nowadays a lot of companies try to do this, most notoriously the defense people, so this is the way the system works, until there is sufficient will on the part of the voters to change.

Another place where they might cross over the line is if a company colludes with its competitors to make some of these types of decisions. Even there, there are trade associations, lobbyist organizations, 'iindustry think tanks" and other ways to skirt around this, and it happens all the time in other industries. Occasionally, however, it is flagrant enough to warrant some of these people being locked up, which is fully deserved, and that is the way it ought to be.

These people are fully aware of what happens to antitrust violators, and normally go to great lengths to keep within the boundaries.

Quote:
In fact, 24 refineries -- many of them small independents -- have shut down since 1995, according to the Energy Department.
That has accounted for the loss of 831,000 barrels a day of
refining capacity. Individual refinery expansions at the same
time have added 1% to 2% of capacity annually


Once again, no one is forcing these people to keep running if they think their investments can do better elsewhere. During this period of time, the high tech boom period, no one wanted to be in refining. Only the people with deep pockets had the chance to stay in the game. Everybody else got out and put their money into Cisco and Sun Microsystems.

If you want people to keep excess capacity running, you have to make sure prices are high enough to assure them of a competitive rate of return on investment. Then you end up like the USSR, or the US agriculture system, with price supports and other subsidies, where the government in effect pays people to not plant or make things.

Some people think this is a good idea, but it's been tried, and found not to work particularly well.
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PostPosted: Sun May 20, 2007 12:52 pm    Post subject: Re: Refinery outages = market manipulation? Add User to Ignore List Reply with quote

Another thing to remember is that arrogance and greed are everywhere, but to get to the likes of Enron it requires a special breed. I doubt you have this happening on a widespread basis, but I will accept that it's possible. I think pup's take is the realistic one. The same thing has been going on in the airline industry with airline seats. When times are bad you can have too many. Managing that very fine line is difficult to do when your inventory costs so much to keep around for when it's needed to make the big dollars.
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PostPosted: Sun May 20, 2007 1:25 pm    Post subject: Re: Refinery outages = market manipulation? Add User to Ignore List Reply with quote

AirlinePilot wrote:
Another thing to remember is that arrogance and greed are everywhere, but to get to the likes of Enron it requires a special breed. I doubt you have this happening on a widespread basis, but I will accept that it's possible. I think pup's take is the realistic one. The same thing has been going on in the airline industry with airline seats. When times are bad you can have too many. Managing that very fine line is difficult to do when your inventory costs so much to keep around for when it's needed to make the big dollars.


Always the voice of treason. Laughing

Enron is the perfect model of what happens when govt. fails to regulate and/or oversee private utilities and infrastructure corporations, that tend toward monopoly or oligopoly. The key feature here, that bears repeating, is the fact that Enron did it's dirtiest work during a time where there actually were some problems with supply. This is how it it is perfectly comparable with oil refiners. It's not one or the other. Constrained supply, due to weather or geology, PLUS conspiracy to withhold supply, work IN TANDEM. It's not one or the other. If you are making record profits and have been doing so for years, and you aren't expanding capacity to accomodate oil that needs more complex refining, you are conspiring to withhold supply. Period.

You are in a different cultural mileau, than I am, so I can understand your confusion. A couple of days ago, our NDP leader, Jack Layton, was up against a spokesman for the petroleum producers on CBC, television. He tore the guy a new one. Told him basically he was a lying sack of sh**, and that no matter how they tried to sugar coat it, the oil producers were price gouging, and colluding to do so. It was great, a breath of fresh air, after listening to your dreary, mealy mouthed "journalists" and "experts", drawn from the obsequious hordes of ass kissers, in the US.

Frankly, our media is tending to become more like your's, but on ocassion, it lives up to it's previous reputation.
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PostPosted: Sun May 20, 2007 2:19 pm    Post subject: Re: Refinery outages = market manipulation? Add User to Ignore List Reply with quote

threadbear wrote:
You are in a different cultural mileau, than I am, so I can understand your confusion. A couple of days ago, our NDP leader, Jack Layton, was up against a spokesman for the petroleum producers on CBC, television. He tore the guy a new one. Told him basically he was a lying sack of sh**, and that no matter how they tried to sugar coat it, the oil producers were price gouging, and colluding to do so. It was great, a breath of fresh air, after listening to your dreary, mealy mouthed "journalists" and "experts", drawn from the obsequious hordes of ass kissers, in the US.

Frankly, our media is tending to become more like your's, but on ocassion, it lives up to it's previous reputation.


I'm in total agreement on your view of the media threadbear. I would be really careful though about the "gouging" issue. I think a lot of us have reffered to this problem in the past. I even think several folks here predicted it. Those who refuse to believe that resource problems are the crux of the issues will first point fingers. I'm not saying collusion or gouging isn't possible. On the contray, I'm confident some of it is occurring, but it's more than likely only partially responsible for price rises.

Pointing fingers due to ignorance is the first thing you see in this country too. It's too easy an excuse and it gives the illusion that things can still be okay as long as we ferret out the evil doers. I see nothing surprising about that at all. I think your going to see a lot more as we settle into PO and things slowly decline with regards to resource quality and production.

If you latch on to the "Big Oil is gouging us" bandwagon, your missing the forest for the trees. It will cloud your judgement of what is really going on. I think that is the larger issue and also the even uglier one when you want to talk about collusion. Government and the energy industry failing misearbly to alert the rest of us to the coming resource nightmare.

The bottom line right now is that here in the states unless demand is checked somehow, we appear to be very near crisis levels of gasoline inventory. If pricing it higher can manage that problem, than I say let it continue. We all knew when we accepted PO that the energy companies were going to get rich beyond imagination due to it. I see the whole thing as another piece of proof that PO and it's effects are with us already.
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PostPosted: Sun May 20, 2007 3:50 pm    Post subject: Re: Refinery outages = market manipulation? Add User to Ignore List Reply with quote

DantesPeak wrote:
I agree very nearly with pup55 ...

I suspect in addition to bad luck (one refinery was struck by lightning and put out of commission in the middle of a Philadelphia winter), refiners failed to properly estimate the wear and tear of running more complex and stressful systems to handle the lower quality crude.

So yes, refiners have some mistakes – but are they intentional? I don't see them as making any more mistakes than any other industry.


How are we supposed to reconcile Dante's above statement with the following statement made yesterday by Pup55?

pup55 wrote:

The notion that the crude oil supply has turned totally to crap is probably an exaggeration... I am sure there is still some light sweet around. It's just that the refiners would like to run the grade of crude that allows them to make the most money... if you are willing to pay $75 for some really light Malaysian oil, you can probably get some, but the refiners probably think they can make more money buying the cheaper grades, and running the refinery slower.


So... if, as Dante's says, our refining bottleneck is mostly the result of some "mistakes" and "bad luck," then why can't our refiners - and particularly the ones who were responsible for making the mistakes - buy a little more of that expensive "really light Malaysian oil" so that they can more quickly return to their production schedules?

The answer I'm likely to get from many of you is "why should they? - the refiners aren't in the business of maintaining their production schedules - they're in the business of maximizing their profits!"

My conclusion is therefore, due to the symbiotic-parasitic effect of an authoritarian, big business-oriented government, and a pure profit-seeking oil industry, America's gasoline business has started to take on the qualities of a managed (yet, ironically, decaying) oligopoly.

Is everyone comfortable with this conclusion?
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