djnemo65
09-02-2005, 03:50 PM
no it doesn't... first off, non oil companies can make refineries. More refineries means higher demand for crude oil, and a higher supply of processed fuels.
Since a refinery deals with processed fuels, and doesn't necessarily have anything to do with the extraction of oil (beyond buying it at market price) they wouldn't be devauling their own product anymore than any other commodity in existance (like, say corn, steel, or aspirin). As long as you can get the efficiencies to work so you make a profit after costs, there's no problem.
By your example we'd only have 2 corn farms in america so they could charge 20$ an ear, but guess what? that'd make absolutely no sense.
None of the big five are actively petitioning to build any new refineries. It is true that a few private companies are attempting to revitalize the refinerey industry, but most shy away from the unpredictability associated with it. Says the NY Times:
"The business of turning crude oil into gasoline, jet fuel or heating oil has rarely been a lucrative proposition. It has dismal profit margins compared with its more glamorous cousin, exploration. It is highly cyclical and fairly unpredictable, because demand for gasoline swings sharply by season. And because of low oil prices over the past decades, refiners have been forced into cutthroat competition that has driven many of the smaller refiners out of business."
I don't think you understand how limiting refinement capacity can impact price so let me explain it again. By operating at full capacity no reserve supplies are accumulated, which keeps the price high. More oil going into the marketplace would bring the price down. Add in the fact that it costs about 3 billion dollars to build a refinery, and that congresss didn't exempt refineries from MTBE liability, and you can see why its not econimical for big oil companies to build new plants.
While your corn example is obviously and intentionally ridiculous, it does somewhat parallel recent history. In the 90's congress repealed a new deal farming policy which had limited the amount of corn farmers could sell. Once this act was repealed the farmers accidentally killed their own profits by glutting the market with corn and driving the price down. I think it was called the Freedom to Farm act or something. The big oil companies, being much more oganized, did not commit a similar error. I will again refer you to the 2001 FTC report which found they colluded to artificially inflate price by intentionally limiting refinement capacity.
But I'm not gonna quibble over details anymore. The point is this: it is absurd to blame the environmental movement for limitations in US refinement capacity. To do so displays inadequate knowledge of a much more complicated situation.
Since a refinery deals with processed fuels, and doesn't necessarily have anything to do with the extraction of oil (beyond buying it at market price) they wouldn't be devauling their own product anymore than any other commodity in existance (like, say corn, steel, or aspirin). As long as you can get the efficiencies to work so you make a profit after costs, there's no problem.
By your example we'd only have 2 corn farms in america so they could charge 20$ an ear, but guess what? that'd make absolutely no sense.
None of the big five are actively petitioning to build any new refineries. It is true that a few private companies are attempting to revitalize the refinerey industry, but most shy away from the unpredictability associated with it. Says the NY Times:
"The business of turning crude oil into gasoline, jet fuel or heating oil has rarely been a lucrative proposition. It has dismal profit margins compared with its more glamorous cousin, exploration. It is highly cyclical and fairly unpredictable, because demand for gasoline swings sharply by season. And because of low oil prices over the past decades, refiners have been forced into cutthroat competition that has driven many of the smaller refiners out of business."
I don't think you understand how limiting refinement capacity can impact price so let me explain it again. By operating at full capacity no reserve supplies are accumulated, which keeps the price high. More oil going into the marketplace would bring the price down. Add in the fact that it costs about 3 billion dollars to build a refinery, and that congresss didn't exempt refineries from MTBE liability, and you can see why its not econimical for big oil companies to build new plants.
While your corn example is obviously and intentionally ridiculous, it does somewhat parallel recent history. In the 90's congress repealed a new deal farming policy which had limited the amount of corn farmers could sell. Once this act was repealed the farmers accidentally killed their own profits by glutting the market with corn and driving the price down. I think it was called the Freedom to Farm act or something. The big oil companies, being much more oganized, did not commit a similar error. I will again refer you to the 2001 FTC report which found they colluded to artificially inflate price by intentionally limiting refinement capacity.
But I'm not gonna quibble over details anymore. The point is this: it is absurd to blame the environmental movement for limitations in US refinement capacity. To do so displays inadequate knowledge of a much more complicated situation.