Shell cancels multi billion $ refinery investment

Denny

I think the majors are seeing that expanding capacity by "downstream" investment in petroleum is an obsolete concept, like investing in a white elephant.

Ontario was hit hard last year by a refinery outage, and this market has grown a lot in 15 years since the last major refinery was built. A situation a lot like the U.S., Ontario may be more or less a microcosm of North America's retail side of petroleum.

See Globe "Shell quits Sarnia refinery plan"

Some telling phrases in the article:

"Meanwhile, prices for crude oil have climbed rapidly to records near $150 (U.S.) a barrel in recent months, squeezing profit margins for refiners despite unprecedented gasoline prices.

“So, there's not a lot of incentive to get these refineries up and operating, even though there's pretty strong demand for gasoline and lower gasoline prices,” Tristone Capital analyst Chris Feltin said."

Cashmere · Light Sweet Crude Joined: Mar 27, 2008 Posts: 1971

Smart move.

In unrelated news, it was discovered that 10 days before the last trees were cut down on Easter Island a boating analyst was noting that there was great incentive to get new boat-building businesses started because the price of wood was so high.
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emersonbiggins

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Cashmere · Light Sweet Crude Joined: Mar 27, 2008 Posts: 1971

Impervius · Tar Sands Joined: May 27, 2008 Posts: 20

The oil companies won't admit to it, but they understand the reality of Peak Oil.

Peleg · Heavy Crude Joined: May 20, 2008 Posts: 391

MrBill · Expert Joined: Sep 15, 2005 Posts: 5394 Location: Eurasia

RBOB is selling for $3.40 a gallon and Heating Oil for $3.85, so the 3.2.1 crack margin in the US is $11-12 per barrel falling to $8-9 in the next few months. $11-12 per barrel on $140 crude is only a 8% margin, so I really do not see any incentive for these companies to ramp up capacity given their fixed costs are spiralling upwards. The NIMBY crowd are just getting what they asked for. Fewer refineries.
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Peleg · Heavy Crude Joined: May 20, 2008 Posts: 391

MrBill · Expert Joined: Sep 15, 2005 Posts: 5394 Location: Eurasia

They lost sight of the bigger picture as they got caught up in their own day to day amusements and diversions.
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The organized state is a wonderful invention whereby everyone can live at someone else's expense.

TheDude

As I understand it expansions in NA for the last 10-12 years have yielded the equivalent of 10 new refineries anyway.
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