House Democrats reject bill that would make it easier to build refineries

I agree. if it was profitable to build more refineries, they would.


thanks on addressing what they are doing with all this money, I was wondering. I'm not anti oil industry, I work in a job with most of our customers are in the oil industry, I know what its like to be living in Houston when their is excess supply and companies are laying off.

I'm just saying, if they really needed more refining capacity, they would find a way to get it done

 

Not to mention how those big bad liberals have cowed the Administration into p***y footing around in Iraq insteand of gittin-r-dun. If the conservatives are this wimpy when they control all the levers of power at the federal level, I don't think li'l t will be able to keep his panties dry if the Democrats manage to capture the House or Senate this year.

 

Question 1:

If ExxonMobile is drilling in say, Canada, it is considered Canadian oil (hence foreign dependency) even though it is an American company that is drilling it, right?

Question 2:

Does Canada charge ExxonMobile for each barrel of crude or do they simply "lease" the land and ExxonMobile can pump as much oil as they want? I think I know this answer so that leads to Q3.

Question 3:

I guess since Big Oil owns upstream/mid/downstream processes, they don't get penalized for the increased price of their raw materials (crude) when making gas? So the analogy of a furniture making doesn't apply unless that maker harvests his own wood and would be unaffected if wood prices increased ...and would actually benefit from that increase since he could thusly charge more if demand for wood products increased.

Bigtexxx has yet to respond to the rebuttals that Repubs run congress and the failure of the bill lies squarly on them AND hasn't responded to oil companies record profits yet they still CHOSE not to build refineries (although MaxMax said ONE is being built despite no tax incentives).

 

good questions, i think artv could answer them.

 

Because the oil companies told them too.

 

I'm telling ya...it's a bubble...and I think it's gonna burst in a bad way for our local economy, given the huge presence of energy companies here.


Also...apparently Congress is inquiring into refining issues with the companies more deeply. Hopefully.


http://www.chron.com/disp/story.mpl/front/3839218.html

Oil prices drop another $2.34 a barrel


By BRAD FOSS
Associated Press

WASHINGTON — Oil prices sank more than $2 a barrel for the second straight day today, falling below $70 as traders focused on U.S. government data that show gasoline supplies grew last week, reversing two months of declines.

"It has largely been a technical selloff," said ABN Amro broker Lee Fader. "Some of the air is coming out of the bubble."

The selloff coincided with a House energy committee's decision to send letters to major oil companies seeking detailed information about their investment priorities, particularly in the area of U.S. refining capacity, which has been very tight and a factor contributing to soaring pump prices.

After falling as low as $69.30 a barrel, light sweet crude for June delivery settled at $69.94, a decline of $2.34 on the New York Mercantile Exchange. Prices had plunged $2.33 Wednesday after the U.S. Energy Department released its weekly report showing a supply rise as refineries boost output and demand flattens.

Many analysts believe the government data point to a consumer response to pump prices that exceed $3 a gallon in many parts of the country.

Gasoline futures tanked by 9.11 cents to close at $1.9946 a gallon, and some analysts say it could be a sign that the 2006 highs for retail gasoline prices in the U.S. are behind us — assuming there is no repeat of last summer's ferocious Gulf of Mexico hurricane season./

"Never underestimate the capability of markets to overreact and shift moods with no stability in between," said analyst Tom Kloza of Oil Price Information Service in Wall, N.J.

In London, Brent crude futures lost $2.36 to close at $70.29 a barrel on the ICE Futures exchange.

While Nymex oil futures have fallen more than $5 from their intraday peak of $75.35 reached April 21, prices remain roughly 40 percent higher than a year ago and analysts do not expect them to free-fall anytime soon given the high level of geopolitical tensions.

"We're getting a very sizable selloff and rightfully so given how quickly we went straight up," said James Cordier, president of Liberty Trading in Tampa, Fla. "Gas prices should come down a bit in the next few weeks... but I think we're going to go back up. There's too many factors ahead of us."

The most pressing source of anxiety in the market stems from the possibility that Iran, a key oil exporter, could cut supplies because of international pressure to modify its nuclear program. Unrest in Nigeria, war in Iraq and rising resource nationalism in South America have added to oil-market worries.

Some 500,000 barrels per day of Nigerian production, most of it operated by Royal Dutch Shell PLC, remains off-line because of violence there, and more than 300,000 barrels per day remains shut down in the Gulf of Mexico since Hurricane Katrina smacked offshore platforms.

Strong global demand and a limited supply cushion magnify the significance of these events, while a surge of investors betting on oil and other commodities has also lifted prices.

"Make no mistake, even if the market endures a $5 or $6 correction, that wall of worry is not coming down, nor are prices," said John Kilduff of brokerage Fimat USA Inc.

The spark for today's selloff was the U.S. government supply data released Wednesday, analysts said.

The U.S. Energy Department's weekly petroleum report showed that over the past four weeks, average daily gasoline demand in the United States was 9.127 million barrels per day, barely higher than year-ago demand of 9.125 million barrels a day.

The report also showed that domestic inventories of gasoline climbed by 2.1 million barrels, reversing eight straight weeks of declines. U.S. gasoline supplies stand at 202.7 million barrels, or 5 percent below year-ago levels.

In other Nymex trading, heating oil futures finished 6.55 cents lower at $1.9377 a gallon, while natural gas futures rose 30 cents to settle at $6.906 per 1,000 cubic feet.

 

I can't speak to the other questions, but this would be true. The company (Exxon, for example) is there at the other government's pleasure. That government could kick them out at any time - it would be a violation of contract, but nevertheless, they could do it. So by that standard, we are still dependent on the foreign country.

As far as building refineries - this just goes to simply business. If it's profitable to build them, they'll be built. The reality is that its probably not smart business. A new refinery would take years to build - if the prices are really spiked due to temporary concerns about the Middle East, it makes no sense to invest assuming today's prices will last. In addition, with all the move towards alternative fuels, is it really worth building a refinery that could be useless in 20 years due to reduced demand? Refineries are long-term projects and require looking at long-term horizons. If prices rise in the short-term, the oil companies don't care - that's just more revenue with limited additional expense, as we've seen in recent years.

The oil companies aren't particularly concerned about high oil prices. That's a government concern, and the only way a new refinery will be built if not for profit motive is if the government subsidizes it. Personally, I think government resources would be far better used on developing legitimate alternative fuels sources or improving efficiency rather than helping bolster supply.

Bigtexxx and the like complain about this bill failing, but don't seem to have any problem that Republicans rejected calls to raise fuel standards over the last several years (which Bush is now open to) that would help alleviate demand over the long term.

 

I agree, what I was gonna say earlier is that we're in a strong economic cycle adding to increased demand. refining isn't a temporary project, its a long-term project and these oil companies would lose tons if they added capacity and oil prices and demand fell as soon as they were up and running.

 

I think they had a similar investigation 4 or 5 years ago when they probed these companies for possible collusion. The findings were interesting. Major oil companies had horizontally integrated systems that fine tuned their inventories with their delivery systems. While ostensibly efficient, when there's a supply shortage (such as the explosion of the oil refinery in northern California) it created large regional disruptions that raised the price of oil while giving huge profit margins to the same oil companies. So the claims of Texx that there isn't enough refineries because the air is too clean isn't quite as genuine as it seems.

The study also found that local prices fluctuated very routinely and was based on an esoteric system that measured how much oil companies can charge their gas stations. Location was a high indicator. Competing gas stations from major oil companies weren't as important as independent brands. This could explain why gas was cheaper/more expensive 10 blocks away because it was due to the presence of a mom & pop or Arco station than "supply and demand". It wasn't the gas stations that were responsible for pricing (their margins were much lower), but the suppliers with their horizontal control of the industry.

Despite all these findings from Congress's investigation, no blatant signs of collusion were evident and the issue all but disappeared.

http://www.ftc.gov/os/2001/03/mwgasrpt.htm

 

I'm no oil expert either but I do follow it because I have a heavily vested interest in refineries and it only makes since that with that much money riding on something, you'd better do some research.

I'd guess....
Question 1 is that it would count as an import.
Question 2 is that it would vary by country. Some would let you buy the land, pump it, pay a export tariff, then sell the land when it's dry. Other countries would have you lease the land, pump it, pay a export tariff to the government and pay per barrel royalties fee to the land owner.
Question 3 is true regardless of 2.

Interesting enough though is the government makes more profit (in taxes) on a gallon of gas than most refining companies do and has for years.

 

Thanks ArtV.

I recently heard some talk about breaking up the oil companies since competition seems to be stifled at this point. I don't know if simply splitting them up does much but it seems seperating the upstream vs downstream operations would make things more honest. I dunno.

That is interesting. So the government actually has a vested interest to sustain gas prices. What would be interesting is if an alternative fuel sources was developed, that would dramatically cut revenue streams and they'd have to figure out a new way to charge us.

I actually heard something like this once where somebody proposed a new tax based on your mileage in favor of dropping the gas tax altogether. To do so, they'd have to install something on your car but privacy advocates screamed murder.

 

Why would it be bad for the economy?

 

^^^^^NEVERMIND^^^^^ I forget that you all live in Houston and Texas primarily which is very dependent on the energy industry for jobs and the like.

 

IMO, breaking up oil would cause an increase in price - but who really knows for sure?

The federal government gets a flat price per gallon for every gallon sold. Then state governments get a some too, though the states vary - some are flat and some are by the price/cost. Then some states allow for additional local fees. The states that are by the price are making more money today.

 

Hey Max, oil prices are back above $70 a barrel today but no telling where it ends up by the end of the day. Could be up, could be down.

http://news.yahoo.com/s/ap/20060505/ap_on_bi_ge/oil_prices_57

LONDON - Crude oil futures prices rose above $70 a barrel Friday after sinking earlier this week on U.S. government data that showed an increase in gasoline supplies.

Light, sweet crude for June delivery on the New York Mercantile Exchange rose 68 cents to $70.62 a barrel in electronic trading by afternoon in Europe. The contract had fallen $2.34 to settle Thursday at $69.94.

Gasoline futures, meanwhile, gained 2.5 cents to $2.0200 per gallon.

On Wednesday, the U.S. Energy Department released a weekly report showing a supply rise as refineries boost output and demand flattens.

Many analysts believe the government data point to a consumer response to U.S. pump prices that exceed $3 a gallon in many parts of the country.

While Nymex oil futures have fallen more than $5 from their intraday peak of $75.35 reached April 21, prices remain roughly 40 percent higher than a year ago and analysts do not expect them to free-fall anytime soon given the high level of geopolitical tensions.

The most pressing source of anxiety in the market stems from the possibility that
Iran, a key oil exporter, could cut supplies because of international pressure to modify its nuclear program.

Iran's state-run television reported Friday that the oil ministry took a step toward establishing an oil trading market denominated in euros, rather than the U.S. dollar, by granting a license for the bourse. Trading on oil markets such as New York and London is conducted in dollars.

It wasn't clear who would trade on an Iranian market. Iranian television did not mention trading firms or governments willing to market or purchase products on the bourse, nor did it say when it would open for business.

Iranian legislators earlier this year urged the government to set up the market to reduce the United States' influence over the Islamic republic's economy.

Besides tension over Iran, unrest in Nigeria, violence in
Iraq and rising resource nationalism in South America have added to oil market worries.

Some 500,000 barrels per day of Nigerian production, most of it operated by Royal Dutch Shell PLC, remains off-line because of violence there, and more than 300,000 barrels per day remains shut down in the Gulf of Mexico since Hurricane Katrina battered offshore platforms in August.

Strong global demand and a limited supply cushion magnify the significance of these events, while a surge of investors betting on oil and other commodities has also lifted prices.

June Brent on London's ICE Futures exchange gained 89 cents to US$71.18 a barrel.

In other electronic trading involving contracts listed in New York, heating oil prices advanced nearly 2 cents to $1.9570 a gallon and natural gas rose 21 cents to $7.120 per 1,000 cubic feet.

 

House Passes Refinery Bill


WASHINGTON, June 7 — The House passed a bill on Wednesday that its Republican sponsors said would streamline the permit process to build the first domestic oil refineries in a generation.

The vote was largely along party lines, 238 to 179, closely mirroring a vote on the same bill last month, when 237 lawmakers supported it in a procedure that required two-thirds approval for passage.

The bill would create a federal coordinator to manage the permit process for a new refinery by bringing together agencies from all levels of government. Another provision would require the president to identify at least three closed military bases as suitable refinery sites, a provision that President Bush supports.

For now, the Senate has no comparable bill under consideration.

Citing the rising demand for oil products and an industry operating at near peak capacity, the bill's proponents said new refineries would create added supplies.

Representative Joe L. Barton, Republican of Texas, who is chairman of the Energy and Commerce Committee and a chief sponsor of the bill, said it was intended "to show America that we're doing everything possible to alleviate high energy prices."

But detractors argued that the measure would have little bearing on gas prices and was largely unnecessary, saying that the energy bill passed last year had suitable provisions for refinery construction. They also said oil company executives have told Congress that adding capacity through expansion makes more economic sense than building new facilities, with its risks of community opposition. Company executives have also testified that environmental laws have not impeded expansion plans.

"Between September 2004 and September 2005, refiners have made 255 percent profit," said Representative Rick Boucher, Democrat of Virginia, who was leading the opposition to the bill. "When you're doing that well, why would you change anything?"

While the number of domestic refineries has fallen to 148 from 324 since 1981, largely through mergers and consolidation, American oil companies are producing about 17.3 million barrels of the daily demand of 21 million barrels of oil and have plans to add 1.4 million to 2 million barrels a day over the next several years.

The last time a refinery was built in the United States was 1976.

Alan Greenspan, the former chairman of the Federal Reserve, told the Senate Foreign Relations Committee on Wednesday that sharply higher oil prices have not seriously hurt economic activity in this country or around the world. However, he added, "Recent data indicate we may finally be experiencing some impact."