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As I just heard on CNBC, no less an authority than ExxonMobil maintains that oil refinery capacity in this country has grown faster than demand.  While it is true that there has been no completely new refineries built in 30 years, existing refineries have been expanded.  Offshore refineries have also been built in places like Aruba.  So can we finally put this chestnut to rest?

Also, I will take issue with a popular diary from yesterday.  Oil Prices are indeed manipulated on a worldwide basis....

 OPEC is a cartel whose major purpose is to manipulate the price of oil.  Such a cartel would be illegal under national or international law if it was composed of individuals or private companies.  The multinational oil companies, however, are not OPEC's victims, but their collusion partners.  There are fewer important oil companies than there are oil producing nations; you can number them on one hand, ExxonMobil, ConoccoPhillips, ChevronTexaco (note all the compound names), British Petroleum, Shell.  They have more power than the OPEC countries.  Some of the latter are pathetic.  Nigeria, for instance, loses money net on the oil business because it spends more money for the refined products than it gets for its crude oil.

The muultinationals have long term contracts or production sharing agreements with OPEC.  Both companies and contracts benefit when the spot price increases, because their cost is so much lower.  

If their was truly international competition in the oil markets, there is no way that the oil companies could be making the obscene and unprecedented profits they are making.

Their used to be a remedy for this: antitrust laws.  Standard Oil was split into many parts a century ago.  It has been slowly aggregating again ever since.

Originally posted to MadScientist on Wed Apr 26, 2006 at 06:54 AM PDT.

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Comment Preferences

  •   I would like to know (3+ / 0-)
    Recommended by:
    rockhound, Arken, smokeymonkey

      what they base this statement on. And more importantly, has capacity caught up to demand? Do we now have enough backup capacity to prevent price spikes every time a refinery goes down for routine maintenance? Are we still importing gasoline?
       Why do I have a hard time believing anything the oil companies say?

    "Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power" -Benito Mussolini

    by happy camper on Wed Apr 26, 2006 at 07:20:45 AM PDT

    •  "Glib demand forecasts" (1+ / 0-)
      Recommended by:
      Maritime Global Net:
      "Energyfiles Director Dr Michael R. Smith, and lead analyst, says 'the ten-year data demonstrate that it is no longer appropriate to accept glib demand forecasts from oil companies, financial institutions and governments that predict, with wishful thinking, ever-growing demand levels, contrary to observations on oil supply. Suggestions that oil consumption will grow to up to 120 mm bbls per day by 2020 and that automobile and airline traffic will increase at extraordinary rates are futile and damaging to policy makers.'

      'Such forecasts, divorced from reality, fail to take account of tight supply conditions and rising prices. We will be unable to produce oil at these rates without unbelievable step changes in technology. After 2010, and for periods before this, oil supply limitations and prices will seriously subdue energy demand unless suitable liquid alternatives are developed.'

      For example Lord Browne of BP has said that oil prices are likely to remain above $40 a barrel but only until new supplies come onstream in a few years. Albert Bressand, a vice president of Shell, offers a scenario coherent with a long-term price range in the $30 to $40 range, whilst the CEO of Shell said in early June that energy demand in the next 30 years will grow faster than in the past three decades. Meanwhile Geoff Curry, head of commodity research at Goldman Sachs recently said, "the real problem is a lack of refining capacity."

      Careful forecasts of supply data do not support such speculations. "Projections in 'Oil and Gas 2006' are consistent with rapidly rising prices after 2010 accompanied by painful conservation," Smith says. "Sufficient new supplies will not come onstream to replace the inexorable depletion of existing fields, especially those old, 100 or so, giant fields responsible for around 65% of global supply, such as Ghawar (1948) and Safaniya (1951) in Saudi Arabia, and Burgan (1938) in Kuwait."

      <div style="color: #a00000;"> Our... constitutional heritage rebels at the thought of giving government the power to control men's minds. Thurgood Marshal

      by bronte17 on Wed Apr 26, 2006 at 08:47:59 AM PDT

      [ Parent ]

  •  What about Senator Ron Wyden's (D-OR) (2+ / 0-)
    Recommended by:
    bronte17, rockhound

    report saying that the oil industry has intentionally been reducing refinery production:

    Information I have received during my ongoing investigation raises serious concerns that the nation’s major oil suppliers have set out in a strategic effort to orchestrate a financial triple play, a coordinated effort that would reduce supply, raise prices at the pump and relax environmental regulations. Unfortunately, in each case, it is the consumer who takes the hit.

    While the documents target activity on the West Coast and refinery closings in 11 states, they point to practices with significant national ramifications. The companies involved are national companies that operate in multiple states. In addition, gas and oil is a fungible commodity and the amount of capacity that has been taken offline is significant enough to affect national markets.

  •  don't know the basis (2+ / 0-)
    Recommended by:
    bronte17, smokeymonkey

    But if ExxonMobil says they can increase refining capacity faster than demand, we can stop blaming the lack of refining capacity on tree-huggers.

    •  I haven't located any info on the CNBC statement (0+ / 0-)

      per "Refinery Capacity Has Been Growing Faster Than Demand."

      I'm thinking it may be the spread is so small in supply and at this particular moment in time perhaps refineries are not operating at capacity or whatever...

      <div style="color: #a00000;"> Our... constitutional heritage rebels at the thought of giving government the power to control men's minds. Thurgood Marshal

      by bronte17 on Wed Apr 26, 2006 at 08:55:31 AM PDT

      [ Parent ]

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