Posted: Thu May 17, 2007 7:11 pm Post subject: Re: Refinery Outages
Same deal as the manipulation of the electrical market by Enron. It happened in a dry year when hydro production was compromised. They rode that baby of an excuse to record profits.
Posted: Thu May 17, 2007 10:35 pm Post subject: Re: Refinery Outages and Pipeline Problems
pup55 wrote:
Quote:
How about piepline problems
Good idea. I've changed the thread title.
Thus far, making a conservative estimate when the plant says they have shut down "a unit", I have a solid .515 mbpd total down for various reasons, not including the pipelines.
Since 9.6 was considered "full production" post-Katrina, this means that we will be hard pressed to get over 9.1 or 9.2 until at least the end of May.
Quote:
Same deal as the manipulation of the electrical market by Enron
I have heard this theory before. I still find it hard to believe that they are that well organized. On the other hand, it is clear that putting off maintenance has paid some dividends (in a way). On the other other hand, the responsible people who took their downtime earlier and maintained their plants are able to take advantage of the high prices at full production.
edit: to add the shutdown of the rest of the BP Texas City capacity.
You find it hard to believe that they are that well organized?
The bulk of the oil is refined by just a few refiners. If they have their sh*t together enough to engage in the "conspiracy" of hiring and training individuals in a hierarchical system called a corporation, in the interest of refining gasoline and distributing profits to shareholders, they can organize to create conditions to drive prices up. It aint brain surgery!
Posted: Fri May 18, 2007 2:32 am Post subject: Re: Refinery Outages and Pipeline Problems
Quote:
The bulk of the oil is refined by just a few refiners. If they have their sh*t together enough to engage in the "conspiracy" of hiring and training individuals in a hierarchical system called a corporation, in the interest of refining gasoline and distributing profits to shareholders, they can organize to create conditions to drive prices up. It aint brain surgery!
I would disagree about that and think the main source is human stupidity and hubris. From what I have seen of human behaviour here in Southern California I feel that people here in America above all are responsible for the shortage of refinery capacity.
With people so opposed to building LNG facilities its difficult to imagine how much local opposition a proper refinery would attract.
In fact its taken 10 years to get a refinery built in Arizona and its still facing legal challenges. The most recent one by Yuma Indians who have successfully halted construction. Of course by all the legal challenges have been settled and construction is complete and a refinery comes on line we could be talking 15-18 year time frame. In short this refinery project could be equivalent in terms fo time could be the same as raising a newborn infant and put them through high school! Can anyone afford to tie up capital for an entire generation without seeing a return? Is this a reasonable expectation for a CEO of a public company I don't think so.
Is it really any wonder that the majors are reluctant to build more refineries with so much public opposition and so many legal challenges? Do you really blame the majors for not wanting to tie up billions of dollars in a refinery that may never get built.
People are just stupid. We need fossil fuel to keep our society functioning yet we seem to be doing everything possible to prevent further development of fossil fuel infrastructure.
Last edited by mefistofeles on Fri May 18, 2007 10:25 am; edited 1 time in total
Posted: Fri May 18, 2007 6:02 am Post subject: Re: Refinery Outages and Pipeline Problems
As go the refineries so goes the gas lines. Gasoline stocks are at the lowest levels in 16 years and all of this is going to make for an interesting summer.
Joined: Sep 16, 2004 Posts: 4281 Location: Southwest WI
Posted: Fri May 18, 2007 7:28 am Post subject: Re: Refinery Outages and Pipeline Problems
threadbear-
When they aren't making gasoline, they aren't making money. I suppose you could say that they are waiting until the "high" gas prices hit, but how high can they go before the economy crashes and life as we know it drops into the dark ages?
Unless you have inside proof, its all speculation. Do you know people on the inside who have revealed this shocking information to you?
It is interesting to note that not a single PO.com member that i know of is working for one of these refineries here in the US. _________________ "Oil is going up because we use too much oil, and the capacity to replace reserves is dwindling"
-President Bush 11/07/07
Posted: Fri May 18, 2007 8:03 am Post subject: Re: Refinery Outages and Pipeline Problems
I have actually been in meetings in one of these similar continouous-process industries about this very issue. It goes something like this:
VP Production: We need to take Unit 1 down for two weeks for a turnaround.
VP Marketing: You can't do that. We are making record UDC (unit day contribution) right now because the prices are high, and we are running Unit 1 full out.
Maintenance Manager: If you don't take it down, it will take itself down.
VP Marketing: You know our numbers were terrible in the third quarter last year, when the price went to hell after there were no hurricanes last summer. We did not take the unit down then because we knew it would make our 4th quarter numbers even worse. If we take too much downtime, it will screw up our numbers for this quarter too. Then wall street will kick our sorry posteriors to the curb.
Maintenance Manager: You can take it down now, or you can wait until it breaks down later, and if the price is even higher later on, you will lose out on even more money.
VP Marketing: What if the price goes down between now and the end of the summer? We will have missed an opportunity to fatten up right now. Mike Lynch and Lindemer both think that the prices will mellow out at the end of the summer. They are petroleum experts. Why don't we make hay while the sun shines, and run full out right now?
VP Engineering: Why don't you take it down for a couple of days and do a quick repair job on the most critical items. You might be able to get it to limp through until September.
VP SH and E: What is that supposed to mean? Put a bucket under the leak and hope for the best?
Maintenance Manager: I suppose this is do-able, but the longer we run without a complete maintenance turnaround, the more the risk of something really serious happening, that would cause really serious downtime, even longer than we had before.
VP SH and E: You mean like Texas City, which had a fire a year ago and still has not come back to half capacity? There were about 20 fatalities down there, as I recall.
Maintenance Manager: (in Scotty voice) "It's all I can do to hold her together. I don't know how much longer she can take the strain"
VP Marketing: We can't take downtime with the prices this high.
VP Production: The longer we run, the higher the risk.
CEO: The bandaid approach. Make it happen. I have a meeting next week with the analysts that cover our stock. If we do not have strong numbers, the mutual fund people that control our stock will pummell me, and I will get a slightly smaller bonus.
So who gets fired when the plant goes Kaboom and kills a lot of people? Scotty, of course. Either that or the safety guy. Trust me, this happens.
Posted: Fri May 18, 2007 12:06 pm Post subject: Re: Refinery Outages and Pipeline Problems
frankthetank wrote:
threadbear-
When they aren't making gasoline, they aren't making money. I suppose you could say that they are waiting until the "high" gas prices hit, but how high can they go before the economy crashes and life as we know it drops into the dark ages?
Unless you have inside proof, its all speculation. Do you know people on the inside who have revealed this shocking information to you?
It is interesting to note that not a single PO.com member that i know of is working for one of these refineries here in the US.
Refiners constrain supply, driving the price up. Happens all the time. It's common knowledge. They make more money by doing this than operating at capacity, and opening new refineries. Any rube can see that. Do I have inside knowledge? Why yes, and it's called a sixth grade education....the kind that ennables me to READ.
The New Yorker magazine (engages in more SHOCKING speculation)
Unfortunately, the lack of capacity that Washington sees as a crisis looks like an ideal business model to oil refiners. There are so few refineries in the U.S. now that they are run tight to the bone, typically using about ninety per cent of their total capacity. The result is that refining—which, until recently, was a tough, low-margin business—has become tremendously lucrative. Last year, refiners’ profits jumped thirty-nine per cent, to twenty-four billion dollars, and this year should be even better. In California, gasoline prices have risen forty-eight per cent since the end of last year, even though crude-oil prices are up just seventeen per cent. Most of that difference has gone straight into refiners’ pockets.
In a normal marketplace, of course, high prices and profits would drive companies to expand, in an attempt to capture more of the market, or else new players would emerge, hoping to outmaneuver a risk-averse establishment. But the refining industry isn’t a normal marketplace. For one thing, refineries are huge investments—a new one costs at least two billion dollars—and they take a long time to open. This means that although refiners might make more money by opening new facilities and thus serving more customers, they’d rather take the sure money than gamble.
Joined: Apr 05, 2005 Posts: 2417 Location: South of Atlanta
Posted: Fri May 18, 2007 12:58 pm Post subject: Re: Refinery Outages and Pipeline Problems
I talked to a friend (energy consultant) sometime late last week. He works for The Southern Co. and wished to remain anonymous. I asked him If he knew anyone in the refinery end of the oil industry and he said he would get back to me. Yesterday we had a chat and through some friends he knows he found out that what we are fearing is actually true. Oil quality is suffering and the current crop of refineries is not set up for it. The entire industry is SCRAMBLING to patch and hold together equipment to keep the operations going. He thinks its going to get much worse over the next few months according to his sources. Dantes is correct in his assesment that our efficiency is suffering. I believe this is just compounding the problem.
I think If you have been a part of a large corporation, or consulted with one, it is very easy to see how stupid people can be. Bad decisions are made routinely and there are cover ups upon cover ups internally so responsibility is almost impossible to uncover. When this stuff does rear its head there are excuses upon excuses given so shareholders become confused and dont want to be bothered with finding the truth. It happens every day and Im sure its happening now in the scramble that must be going on with refiners.
pup's little conjecture above is so true.
Not everything is a coordinated conspiracy thread. I am confident that to a lot of folks this looks like one as I have heard the blame game beginning already. Folks refusing to see the signs of peak oil, and claiming some sort of obfuscation for profit is almost a form of denial.
Joined: Oct 23, 2004 Posts: 5522 Location: New Jersey
Posted: Fri May 18, 2007 3:01 pm Post subject: Re: Refinery Outages and Pipeline Problems
AirlinePilot wrote:
I talked to a friend (energy consultant) sometime late last week. He works for The Southern Co. and wished to remain anonymous. I asked him If he knew anyone in the refinery end of the oil industry and he said he would get back to me. Yesterday we had a chat and through some friends he knows he found out that what we are fearing is actually true. Oil quality is suffering and the current crop of refineries is not set up for it. The entire industry is SCRAMBLING to patch and hold together equipment to keep the operations going. He thinks its going to get much worse over the next few months according to his sources. Dantes is correct in his assesment that our efficiency is suffering. I believe this is just compounding the problem.
I think If you have been a part of a large corporation, or consulted with one, it is very easy to see how stupid people can be. Bad decisions are made routinely and there are cover ups upon cover ups internally so responsibility is almost impossible to uncover. When this stuff does rear its head there are excuses upon excuses given so shareholders become confused and dont want to be bothered with finding the truth. It happens every day and Im sure its happening now in the scramble that must be going on with refiners.
pup's little conjecture above is so true.
Not everything is a coordinated conspiracy thread. I am confident that to a lot of folks this looks like one as I have heard the blame game beginning already. Folks refusing to see the signs of peak oil, and claiming some sort of obfuscation for profit is almost a form of denial.
Thanks for your real world confirmation of refinery problems.
While it appears that crude oil has peaked (excluding biofuels and low energy products like bitumen), there seems to be no doubt that light sweet crude peaked out permanently in 2005 (at the latest, it may have been 2004). Since it takes about five to ten years to plan and implement refinery improvements, most refiners before 2004 did not anticipate dealing with the falling quality of crude inputs. Profit margins were also very low 6 to 8 years back. Even if a refinery technician had realized that a peak in oil quality was near, it would have been another thing to get his company to implement the change. Small or regional refiners in particular probably wouldn’t have much of a profit incentive to make major changes.
If you ever met the heads of major companies, or worked under them like I have, you will note they are usually optimistic about their industry and just want to get things done. While it is a cliche, those who say yes to these executives and offer positive scenarios are usually the ones that are going to be well liked and rewarded by these chiefs. I assume the same thing applies in the energy industry. Even to this day, doom and gloom about future oil supplies appears mostly to be scorned within the energy – although there is a growing, grudging acceptance of reality.
It’s possible the next gasoline crisis will force a major overhaul of the refining industry. Even if so, it’s going to take few years or more to modify the refinery operations to adjust to the steadily dropping quality of oil. _________________ It's already over, now it's just a matter of adjusting.
Posted: Fri May 18, 2007 4:12 pm Post subject: Re: Refinery Outages and Pipeline Problems
Again, it's always just stupidity and wishful thinking that gets corporations into trouble *sigh* Had Enron not been caught in the act, you would have great sympathy for all of the "pressures of leadership" that bore on Ken Lay, at a very difficult time in the electric generation industry. BAH...
The refiners are holding the whole system together with baling wire, rather than doing basic infrastructure maintenance, which includes expanding refineries.
The numerous breakdowns and refinery closures, are the designed effect of funneling profit to executives and shareholders and ignoring expansion. It's not a mistake, it's not stupidity, hubris, or just an unfortunate occurence. It's planned and implemented policy--organized opportunism.
Because some of you happened to sit in on some meetings with energy companies, doesn't really matter. Do you think that anyone at the top is going to tell you what their real motives are?
If this is the best that can be achieved during times of record profit, it's damned sad. It's a blanket indictment of the privatization model.
Posted: Fri May 18, 2007 6:08 pm Post subject: Re: Refinery Outages and Pipeline Problems
DantesPeak & AirlinePilot, I’ve got to agree with you. I worked as a consultant to G.E. for quit a few years; the idea that G.E. would crash airplanes to help Prat & Whitney is ridiculous. It’s about as ridiculous as Valero burning down refineries to help EXXON!
Posted: Fri May 18, 2007 6:20 pm Post subject: Re: Refinery Outages and Pipeline Problems
threadbear wrote:
If this is the best that can be achieved during times of record profit, it's damned sad. It's a blanket indictment of the privatization model.
A whole bunch of questions:
1) Why, if American refining capacity is down and actual inventory of unprocessed oil is up, is the grade of that unprocessed oil so poor? Why is it that, apparently all of a sudden while our demand for foreign crude is diminished, our refiners are getting such crappy supplies? Could Hugo Chavez possibly be mad at us for some reason?
2) I believe that America routinely only refines about 75% of the gasoline it uses, which means that we routinely import approximately 25%. Does the fact that America's gasoline stockpiles are dwindling imply that the world's gasoline stockpiles are dwindling too? And, if not, and this turns out to be a predominately an America (or North America?)-specific problem, is it possible that our country (or continent?) is in some way is being "punished" by the international community for: a) being too wasteful with its energy consumption, b) printing too much crap currency for the world to handle, c) being just an all around dumb-f*ck nation run by dumb-f*ck leaders? And, finally, could there be some relationship between this and question 1, above?
3) How is it even possible that all the smart people in the oil industry didn't prepare us years ahead for the now more sour crudes that are available?
4) Why hasn't Bushco encouraged or mandated conservation of any sort?
5) Could it be remotely possible that those who are knowledgeable in government are aware that a recession in the US is inevitable, that the consumption and driving habits of the typical US citizen must be broken, and that if there is to be pain then such pain should be channeled into the blaming of scapegoats, such as the governments of third-world oil producing countries?
6) Is it possible that elections in America could be won on the basis of who in foreign lands could be blamed for our impending hardships, or how the countries of North America must now apparently unite if they are to face the challenges of this new century?
7) Is it possible that the "collusion" at the refineries isn't even necessary to get "the people" from where they are today to where the plutocrats want them to be tomorrow? That what's necessary on the part of refiners is that they simply go about their daily business?
Joined: Jun 18, 2005 Posts: 3766 Location: In a van down by the river
Posted: Fri May 18, 2007 8:01 pm Post subject: Re: Refinery Outages and Pipeline Problems
I have to agree here with AirlinePilot and Dantes.
I could see easily how the peak of light sweet crude could creep up on all the major refiners. The larger the corporation the harder it is sometimes for them to adapt and change.
Look at the big three auto makers and the decisions they have made.
Posted: Fri May 18, 2007 8:11 pm Post subject: Re: Refinery Outages and Pipeline Problems
Eli wrote:
I have to agree here with AirlinePilot and Dantes.
I could see easily how the peak of light sweet crude could creep up on all the major refiners. The larger the corporation the harder it is sometimes for them to adapt and change.
Look at the big three auto makers and the decisions they have made.
Let it happen on purpose. It's not a "peak" problem, Eli.
Posted: Fri May 18, 2007 8:18 pm Post subject: Re: Refinery Outages and Pipeline Problems
Allow me to have a crack at these:
Quote:
1) Why, if American refining capacity is down and actual inventory of unprocessed oil is up, is the grade of that unprocessed oil so poor?
The capacity problems are due to maintenance issues, such as the problems at the two giant BP plants, and not directly related to the type of crude oil (although the comments above about the reactors running hotter makes some sense). The notion that the crude oil supply has turned totally to crap is probably an exaggeration, although clearly, as time has gone on, the crude has become increasingly more sour and heavy because of issues like the North Sea going into serious decline, plus the Saudi supply getting heavier. 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, and it's expensive because it's in short supply
of all of the different grades of crude oil that are available on the market, and what they cost. You can see right away that 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.
Quote:
Why is it that, apparently all of a sudden while our demand for foreign crude is diminished, our refiners are getting such crappy supplies?
Our demand for foreign crude is as high as it ever was. Domestic production will go under 5 mbpd in the next few weeks. The rest is imported.
per the above comment, the refiners are going to buy the grade, however crappy, that allows them to make the most money, even if they have to slow down the production process to use it.
2)
Quote:
I believe that America routinely only refines about 75% of the gasoline it uses, which means that we routinely import approximately 25%.
Last week's figures were: domestic production 9.1 mbpd, imports 1.5 mbpd, so it's more like 17%.
Quote:
Does the fact that America's gasoline stockpiles are dwindling imply that the world's gasoline stockpiles are dwindling too?
There has been some talk recently about this very thing. When we started to import a lot of finished product from Europe about 2 years ago, they were only running their refinery system at about 85% of capacity. I have not checked the numbers lately, but I would say this supply slack is diminishing. Therefore, the US import situation is indeed having an effect on prices and potentially availability elsewhere, such as the UK.
Quote:
And, if not, and this turns out to be a predominately an America (or North America?)-specific problem, is it possible that our country (or continent?) is in some way is being "punished" by the international community for: a) being too wasteful with its energy consumption, b) printing too much crap currency for the world to handle, c) being just an all around dumb-f*ck nation run by dumb-f*ck leaders? And, finally, could there be some relationship between this and question 1, above?
Thus far, the Europeans seem to be reasonably willing to sell us gas as long as we pay the price for it. For the moment, money trumps politics. After all, our Navy is "protecting" the oil supply for Europe and Japan, so the public in most of these places can be ticked off at the US, but the governments know that they cannot get too far out of line.
Quote:
3) How is it even possible that all the smart people in the oil industry didn't prepare us years ahead for the now more sour crudes that are available?
This is an interesting question. I would say they did not anticipate the north sea issues, and for sure, the Saudi stuff becoming more sour and heavy. Up until about 2004 it did not make too much difference, because there was a lot of oil around. The problem still comes down to consumption growth. Now that things are tighter, the system is more sensitive to disruption.
Quote:
4) Why hasn't Bushco encouraged or mandated conservation of any sort?
Because Cheney does not believe in it. They think if people conserve, the oil companies will not invest in new capacity as willingly. They are probably correct, unfortunately.
Quote:
5) Could it be remotely possible that those who are knowledgeable in government are aware that a recession in the US is inevitable,
Inevitable is sort of a strong word. I think that they think they can avoid it at least until 2008.
Quote:
that the consumption and driving habits of the typical US citizen must be broken,
There is no political constituency in the US for less driving. The auto companies, highway construction people, used car sales people and repair people plus a lot of upstream and downstream manufacturing depends on the US consumer to wear out and replace about 12 million cars per year. Any conservation directly affects this number.
Quote:
and that if there is to be pain then such pain should be channeled into the blaming of scapegoats, such as the governments of third-world oil producing countries?
Unfortunately, this is exactly what will happen.
Quote:
6) Is it possible that elections in America could be won on the basis of who in foreign lands could be blamed for our impending hardships,
Possible. A billion dollar advertising program might convince 51% of the public to go along with this, and that is what the system is right now.
Quote:
or how the countries of North America must now apparently unite if they are to face the challenges of this new century?
I just don't see this happening personally. I think the apathetic middle will arise if such a thing is suggested.
Quote:
7) Is it possible that the "collusion" at the refineries isn't even necessary to get "the people" from where they are today to where the plutocrats want them to be tomorrow?
Unknown. I am not too much of a conspiracy theorist, per the above, I don't think they are that well organized.
Last edited by pup55 on Sat May 19, 2007 6:12 am; edited 1 time in total
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