Job in Refining

weslinder · Jul 16, 2008

Question for those of you that have a better understanding of market projections than me:

My job sucks, and I've been looking for another job. I have two offers on the table. The lesser offer is with an industrial gases company that supplies all sorts of industrial gases to all sorts of manufacturing and healthcare companies. The better offer is with an independent refining company. Is refining going to suck in the next few years? Should I try to avoid that field? I've worked in refineries before and like the work, but if that industry is going to crash the way it did in the 1980's, I don't want to be tied to it.

Either offer is good enough to leave, and I might be able to squeeze a few more bucks out of the industrial gases company and close the gap between them financially. Really though, I'm looking a few years out with a lot of uncertainty in refining and wondering how good of a long-term choice that will be.

The jobs are really different, but I think I'd like either pretty well.

rhadamanthus · Jul 16, 2008

I don't see refining crashing anytime in the near future. Why would you think that? Even if the market is slowly being pushed to less reliance on refined chemicals/fossil fuels, these types of changes take a while to occur.

Air Langhi · Jul 16, 2008

rhadamanthus said:

I don't see refining crashing anytime in the near future. Why would you think that? Even if the market is slowly being pushed to less reliance on refined chemicals/fossil fuels, these types of changes take a while to occur.
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At crude prices so high, the crack spread is small so refineries don't make a lot of money.

weslinder · Jul 16, 2008

rhadamanthus said:

I don't see refining crashing anytime in the near future. Why would you think that? Even if the market is slowly being pushed to less reliance on refined chemicals/fossil fuels, these types of changes take a while to occur.
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It crashed in the late 1970s - early 80s with similar circumstances. Is demand less elastic now?

weslinder · Jul 16, 2008

Air Langhi said:

At crude prices so high, the crack spread is small so refineries don't make a lot of money.
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The offer I have is at a heavy-sour refinery that's heavy on diesel, so its margins are really good right now. And they've got projects lined up for a while. I'm worried about whenever those projects dry up.

Nuggets4 · Jul 16, 2008

Air Langhi said:

At crude prices so high, the crack spread is small so refineries don't make a lot of money.
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Bingo. Our stock has dropped like a lead balloon this past year.

rhadamanthus · Jul 16, 2008

weslinder said:

It crashed in the late 1970s - early 80s with similar circumstances. Is demand less elastic now?
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Hmmmm. Good point. Certainly, I've read enough to make me concerned, I just don't see it collapsing either. It's not overcapacity anymore, though. Now the problem is peak oil. Dunno what all that entails. The Hirsch report might be a good place to start in terms of "what-ifs"...

Anyhow...

The Oracle of Oil Speaks
Charles Maxwell, the world's wisest energy analyst, says the crunch will only get worse

Note to my editors: I'm putting in for time-and-a-half because lately I've been forced to work overtime as a sounding board for outlandish oil theories from friends, family, and cabbies.

"Mark my words: Tax the heck out of ExxonMobil (XOM) or we'll be paying 10 bucks for regular unleaded."

"You see, $135 oil is just Bush's way of thanking all his J.R. Ewings back in Texas—and Pops paying back the Saudis for Desert Storm."

"Dude, OPEC doesn't want you to know that if you shift into neutral behind an 18-wheeler, you'll get 100 miles to the gallon."

So to all of you armchair Oliver Stones, I bring the wisdom of Charles Maxwell, senior energy analyst at trading-and-research shop Weeden & Co. Having spent 11 years in the oil patch and 40 more on Wall Street, this reserved 76-year-old is the elder statesman of energy research.

Ranked nine times by Institutional Investor as the No. 1 analyst in his field, the professorial Maxwell is sought out not just by fund managers but also by academics, carmakers, and Mideast sovereign wealth funds. He has been corresponding with me over the past three years, scrawling various asides in the margins. The good news is also the bad news: With the price of oil up 700% in seven years, Maxwell has been right. Visiting me in my office with a briefcase full of data, he now foresees unprecedented stress on the world economy as peak oil production arrives in or about 2015.

Although Maxwell retired in 1997, he un-retired two years later on the nagging hunch that low oil prices ($10 per barrel in 1998) would starve the investments necessary to keep up with global demand growth. "We're digging ourselves into another shortage," he prophesied back in 2001, when gasoline fetched $1.25 a gallon. He explains that in response to a price collapse and 18% overcapacity in global oil production in the mid-1980s, oil companies withheld capital spending, bleeding down the capacity surplus to the low single digits by the late '90s and close to zero now.

Maxwell adamantly argues that the system needs more like an 8%-to-10% capacity cushion, especially to absorb inevitable weather and geopolitical shocks. "The problem we face, above all else," he says, "is not that we lack more oil—it's that we lack the man-made capacity to produce more oil." You'd think a price of $135 a barrel would be incentive enough to extract more. But Maxwell says that's far easier said than done in the context of a global shortage of petro-roughnecks and engineers; spiking costs for rigs, drills, and pipes; and the longer lead times necessary to extract harder-to-reach oil. Maxwell presents a chart showing that in 1988, 23 billion barrels were both found and used. By 2007 those numbers had diverged to become a gap of 8 billion found to 31.5 billion used. "We're not well-prepared at all," he says, taking off his glasses and wiping his brow. "By God, we will have to bloody well change." Weaning ourselves off our dependence on cars must be a big part of cutting demand—but that, too, is easier said than done.

Surely, though, motorists, refiners, and even Chinese bureaucrats would have to cry uncle at a certain price. "You would think so, right?" says Maxwell. "In the past, $40 was the breaking point," he notes. "But this time we went through it—then $80, then $120—like a cannonball through paper." And the economy, while weak, has not collapsed as a result.

That has set an ominous precedent: Despite all of our protestations on the evening news, we are apparently able to pay even more. "Among the poor," says Maxwell, "that will expose deep, raw wounds: to eat or not to eat, to heat or not."

Maxwell does reserve some hope for abundant compressed natural gas. He also believes that Canada's bounteous tar sands will fill some of the void.

But he wants to disabuse you of the notion that $200 oil and gasoline priced like vintage Veuve Clicquot will have ExxonMobil in clover. As the rare oil analyst who doesn't reflexively genuflect before that multinational's CEO, Maxwell condemns the company for "irresponsibly" advertising plentiful supplies. "It really does Rex Tillerson no good to keep denying that oil production will be peaking," he says. "Exxon's business plan is from the past 150 years."
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http://www.businessweek.com/magazine/content/08_27/b4091075505012.htm?campaign_id=rss_null

Air Langhi · Jul 16, 2008

weslinder said:

The offer I have is at a heavy-sour refinery that's heavy on diesel, so its margins are really good right now. And they've got projects lined up for a while. I'm worried about whenever those projects dry up.
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Diesel is more prevalent in developing countries; as they start to cut subsidies the diesel demand might start to decrease, I can't believe the amount that diesel has sky rocketed. With crude prices declining I think refiners will really start benefiting.

thelasik · Jul 16, 2008

The refineries that can process sour crude have it pretty good right now. That site probably has a couple coker units also.

thelasik · Jul 17, 2008

Any updates?

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Job in Refining

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