Oil Refiners Face More Pain In 2009-2010 - Analysts

Easy Bourse ^ | April 1st, 2009 | Dow Jones

[thackney]

Oil refiners will face leaner margins over the next two years as weak demand causes a buildup of excess refining capacity, analysts said Wednesday.

"We have a bearish outlook for 2009 on the European refining sector," UBS analysts said in a report. "We have a very negative outlook for refining margins and believe that the market isn't pricing in significantly lower margins."

[mysterio]

The poor oil refiners and gas station owners basically just produce and sell gasoline as a public service because they are thoughtful citizens. They only make a penny for every 10,000 gallons sold, and if I decide not to buy a candy bar with that 10,000 gallons, they might all go out of business and the entire system will collapse.

It makes me wonder why anyone goes into the refining business or gas station business knowing in advance how unprofitable it is.

[norraad]

The trick is keeping several sets of books, it’s messy, necessary, but it works.

[Piquaboy]

I have heard that next Barack wants to take over the oil company’s and drive prices up again.

[mysterio]

Our local pro sports teams have been suspected of doing something like that. They claim they are losing tons of money every year, and unless we give them EVEN MORE tax dollars, they might just have to leave. The rumor is they don’t include league television revenue in the pauper report they give the press.

[Nathan Zachary]

"Oil refiners will face leaner margins over the next two years as weak demand causes a buildup of excess refining capacity, analysts said Wednesday."

Nonsense. Gas prices are still higher than they were when barrel prices were this low in the 80's. (about .85 cents/gal) Oil companies and oil refineries are one and the same. If they aren't making as much drilling holes, then they make up for it at the refineries on gasoline and other petrolatum product pricing.

[Nathan Zachary]

"It makes me wonder why anyone goes into the refining business or gas station business knowing in advance how unprofitable it is."

They are wizzards, they can make billions in profits every quarter, and still whine about 'tough times"

[Nathan Zachary]

Meanwile, the Saudi’s drive around in luxury cars, live in gold palaces, and sell gas in sadi land at 17 cents a gallon (premium)

[stormer]

[stormer]

So why has everyone been bitching about the environmentalists when supposedly they are blocking all kinds of refinery construction when in fact there is excess refining capacity? In the meantime, oil companies are raking it in. And I really don't want to hear a bunch of BS about their itsy-bitsy profit margins, all of the money they “pour” in to R&D, how they are tirelessly working on fossil fuel alternatives, or their dedication to end our reliance on foreign oil. We are being played like fiddles.

[Nathan Zachary]

You gotta laugh at companies like AIR CANADA, who hedged up an entire years fuel supply when barrel prices were around $100. Now they are back in bankruptcy court seeking protection from creditors, because they can't compete with competitor airlines flying around on cheap fuel.

They were part of them problem, edging up barrel prices at the time, now they want the taxpayer to pay for their contempt against them.(again).

GM is going to be to Americans what Air Canada is to Canadian taxpayers, a never ending story of wasteful government management of a business they have no business being involved in.

[Nathan Zachary]

""With the recession-induced demand collapse, this new capacity couldn't have come at a worse time," Francisco Blanch, head of global commodities research at Merrill Lynch said in a research note."

So much for free market enterprise and competition. Not for OPEC, no siree. They claim free market demand when prices go up. then try in vain to cut production in order to prevent the free market realities of supply and demand from reducing the hundreds of billions of pure profit they were making, despite those shieks spending like drunken sailors, trying vain to slow down those semi trailer loads of cash and gold, requiring them to build a new warehouse every week to store it it.

Oh how tough it is to be sitting on top of oil wells that never go dry, are always replenished by the earths abiotic oil making reactions deep in the earth where no dinosaur could possibly have been buried, never mind 500 billion of them. (that's how many dinosaurs would have to have fallen into a large pit, become buried very fast, and magically turned into oil in just ONE Saudi oilfield)

[SaxxonWoods]

Thanks thackney, good information as always.

[norraad]

GM

My beef w/GM is all the wonderful technology they have known about but chose to ignore, due to payoffs and other sneaky backdoor schemes.

To illustrate, we never needed catalytic converters, but alternatives like High Pressure Fuel Injection* would have increased MPG higher than brother big oil could tolerate.

*btw- very clean burning non-polluting system also made engines last practically forever, OMG, that's a no-no!

[thackney]

Gas prices are still higher than they were when barrel prices were this low in the 80's.

Gasoline specifications, requirements have changed a lot since the 80s. More taxes have been added as well.

Oil companies and oil refineries are one and the same.

Tell that to a company like Valero that doesn't own oil production. Even ExxonMobil buys more crude oil on the market than they produce themselves. Far more oil is now produced by Oil Reserve Countries than the old seven sisters of yore.

[Nathan Zachary]

"*btw- very clean burning non-polluting system also made engines last practically forever, OMG, that's a no-no!

You can't believe all the conspiracy theories, and claims of suppressed technology that are floating around the internet either. Most of them are rubbish. We don't really need catalytic converters, that's true- if you don't mind the smog. The reason we need them is because of the ban on the additive MTB (leaded gas)and switch to unleaded gas and the low compression engines needed to burn the cheaper, but more pre-ignition prone fuel. Are their other work arounds? Sure there are, simply adding 10% ethanol improves unleaded regular gasoline's octane from 87 to 89. 20% ethanol improves it from 89-91, the equivalent to premium unleaded fuel

The problem with adding that much ethanol however is it begins to effect fuel mileage, because ethanol and gasoline have much different burning characteristics. Ethanol burns slower and cooler, and therefore needs different advanced timing and timing curve characteristics in the engines operating rpm range. Those settings are completely opposite to what a gasoline burning engine requires however. So mixing ethanol and gasoline begins to loose the benefit after 10-15% ethanol.

You can make a pure ethanol burning engine, which would out preform and get better millage than the best gas burning engine, and it wouldn't need a catalytic converter, because they burn very efficiently and clean.
But then the problem become availability. This is a viable alternative in some states however, because ethanol is readily available.

But, because we have to burn unleaded gas, and octane levels of gasoline engines just can't be raised high enough with sensible ratios of ethanol (under 15%) to allow for higher compression ratios, we can't eliminate the smog causing hydrocarbons caused by the incomplete combustion of these low compression engines. So we need to use a catalytic converter to burn them off.

As for engine longevity, that is mainly dependent of the quality of materials used to build them. Engines are engineered and built for a pre-determined life span, as are car bodies and other components. If everything lasted a lifetime, it would really impact consumerism.

There was a time when things were built to last, and you still see some of those antique products around today. But it was quickly learned that if you built your product too good, your sales eventually dropped as the market became saturated with your product.

[thackney]

Because as companies are completing multi-year, multi-billion dollar refinery expansions, in recent times demand has fallen; the times have changed.

[thackney]

Oh how tough it is to be sitting on top of oil wells that never go dry

LOL!

Fields deplete. They all deplete and sometimes in quite a hurry. Look to Pemex and the Alaskan North Slope when additional exploration in new areas is curtailed.

I've worked on many projects dealing with the decline production of aging fields and how to squeeze the last few drops out.

replenished by the earths abiotic oil

If you had real knowledge of the process, you would understand that heat and pressure BREAK DOWN oil into the smaller, less complex molecules. It is called thermal cracking and we do it in refineries every day.

Just because people wish the laws of entropy were reversed, they don't actually work that way.

[Nathan Zachary]

"Gasoline specifications, requirements have changed a lot since the 80s. More taxes have been added as well."

Taxes yes, but it's still the same unleaded gasoline now as it was in the 80's. Prior to that change, gas was even cheaper. We saw gasoline prices nearly double when unleaded gas became mandatory in the late 70's. I don't know if you are old enough to remember, but it was a real pain in the arse if you had an older vehicle and were forced to burn unleaded. The best you could make it run was buy burning premium unleaded, but the entire characteristics of gasoline changed, the refining process was different.
I guess the best way to describe it is that gasoline coming out of the refineries was a "lower fuel" than what it used to be.

Even before leaded was completely banned, and they still had leaded gas pumps next to the unleaded pumps, leaded gas was different. This was around 1975 or so, when auto builders began making unleaded fuel only lower compression engines.(My 75 Chev 1/2 with a 350 was "unleaded" only) But they still had leaded fuel pumps for the older cars still on the road. Gas was around 45 cents a gal then. I remeber because everyone complained at how sucked out the new, unleaded chev 350 was compared to one just a year older.

Compression ratio's dropped from 12.5:1 to 8.5:1, thats why, and we all wondered and scratched our heads, wondering what that new fangled thing, the catalytic converter was, and cut them off figuring they were robbing us of power, making the burn outs we used to do become pathetically shorter)

[Nathan Zachary]

Yes, fields deplete, and very true that many do in a hurry. That's because the source that made them stopped, probably from shifting deep in the earth. others don't deplete, and actually replenish, because a deeper source is feeding them. The Saudi's seem to be sitting on the replenishing kind, although we seem to have a few off the east coast as well. There are some here in the mid west plains as well that have miraculously replenished themselves, and are producing more than they did when they were first drilled. We now know (or at least theorize) that those earlier wells are being fed by a huge reserve deeper down. At what rate this "abiotic" does this, if indeed that is what the explanation is, and its far from being proven and disproven, (but none the less far better than the dinosaur theory}but it is happening.

It will be a long long time before we are able to prove this one way or another, because we simply don't have the technology to drill that deep (but we are developing it)

[thackney]

but it's still the same unleaded gasoline now as it was in the 80's.

No, it is not. Quite a few new requirements have happened since then, combined with new requirements of the refineries themselves. They all cost more money, thanks to the government.

The following is one of the examples.

http://www.mobil.com/USA-English/GFM/Files/US_Gasoline_Map.pdf

The requirements somewhere in the US change nearly every year. Two years ago it looked like this:

http://www.mobil.com/USA-English/Files/US%20Gasoline%20Map%20100102.pdf

Areas requiring refomulated gasoline, the Tier 1 and now Tier 2 EPA requirements, they all cost money. The rules keep changing forcing the companies to spend additional money.

Additional rules changing the Benzene content will soon go into effect requiring more refinery changes. The customer eventual pays for all new government regulations.

http://www.epa.gov/otaq/gasoline/information.htm

http://www.epa.gov/ttn/atw/nsps/petrefnsps/petrefnspspg.html

[thackney]

because the source that made them stopped

Yes, that area is no longer collecting algae and other organics from the Devonian, Jurasic, Cretaceous or time periods then subjected to millions of years of heat and pressure.

probably from shifting deep in the earth

That certainly happens. Oil stained sand/rock have caused many a geologist to weep after learning the siesmic data did show a presence of hydrocarbons, but it has since moved elsewhere.

The Saudi's seem to be sitting on the replenishing kind

I guess that is why they keep drilling new wells, adding new fields and spending billions of dollars on enhanced oil recovery of aging fields.

There are some here in the mid west plains as well that have miraculously replenished themselves, and are producing more than they did when they were first drilled.

Reserves are based upon existing technology and the ability including economics to recover them. Those numbers are not the total amount of oil below ground.

For example, the oil in the Bakken isn't new to those searching. But the technology that know allows us to produce it is new. So the same old field get the recoverable oil numbers increased without any change occuring below ground, except what's happening inside the wells.

Abiotic isn't a new theory. It has been successful at producing money from gullible investors and even a couple of governments. But only biotic oil sources are in commercial production, with all oil containing biotic markers.

All oil is source to sedimentary rock, never sourced to Igneous.

[Nathan Zachary]

" If you had real knowledge of the process, you would understand that heat and pressure BREAK DOWN oil into the smaller, less complex molecules. It is called thermal cracking and we do it in refineries every day. Just because people wish the laws of entropy were reversed, they don't actually work that way.

And the reverse of that is? Plus you are operating on the THEORY that the deeper you go, the more heat and pressure there is. But, deep bore holes (Kola,Oberpfälz) have already proven that to be NOT true. That both heat and pressure, rock density decline around 4.5 km or so.

Contrary to expectations, signs of rock alteration and mineralization were found as deep as 7 km in the Kola bore. The hole intercepted a copper-nickel ore body almost 2 km below the level at which ore bodies were thought to disappear. In addition, hydrogen, helium, methane, and other gases, together with strongly mineralized water was found circulating throughout the Kola hole. The presence of fractures open to fluid circulation at pressures of more than 3000 bars was entirely unexpected. The drillers at Oberpfälz discovered hot fluids in open fractures at 3.4 km. The brine was rich in potassium and twice as salty as ocean water, and its origin is a mystery.

[thackney]

I don’t know what you are reading but increasing heat and pressure is well documented in these ultra deep holes.

http://www.slb.com/media/services/resources/oilfieldreview/ors95/jan95/01950422.pdf

See page 21 for a straight forward graph.

[Nathan Zachary]

"with all oil containing biotic markers.

All oil is source to sedimentary rock, never sourced to Igneous.

Oil does NOT contain biotic markers, only as a contaminant. The explanation for this is explained away (without any proof)that they were somehow destroyed during the process of conversion to oil of these dinosaurs(organic materials). Also never explained is why these organic materials didn't decay long before they were buried under a mile of rock, sedimentry or otherwise. We can observe how organic material decays quite easily today, and it all decays long before any mentionable layer of sediment falls on top of it, producing small amounts of methane gases.

All oil is sourced to sedimentary rock? no, it's only drilled in sedimentry fractures near rock formations because that's the cheapest, and easiest way to drill. It would be far more costly to drill through solid rock.

[Nathan Zachary]

don’t know what you are reading but increasing heat and pressure is well documented in these ultra deep holes.

Up to 4.5 km, then decreased.

[Nathan Zachary]

Resources:

[1] Richard A. Kerr, 'Continental drilling heading deeper', Science, vol. 224, pp. 1418-20,1984;
Richard A. Kerr, 'Deep holes yielding geoscience surprises', Science, vol. 245, pp. 468-70, 1989;
Richard Monastersky, 'Inner space', Science News, vol. 136, pp. 266-8, 1989;
Taryn Toro, 'German geology hits new depths', New Scientist, 29 September 1990, pp. 24-5;
William R. Corliss (comp.), Inner earth: A search for anomalies, Glen Arm, MD: Sourcebook Project, 1991, pp. 11-14; N.I.
Pavlenkova, 'The Kola superdeep drillhole and the nature of seismic boundaries', Terra Nova, vol. 4, pp. 117-23, 1993;
R. Emmermann and J. Lauterjung, 'The German Continental Deep Drilling Program KTB: overview and major results', Journal of Geophysical Research, vol. 102, pp. 18179-18201, 1997;
Y.A. Popov, S.L. Pevzner, V.P. Pimenov, and R.A. Romushkevich, 'New geothermal data from the Kola superdeep well SG-3', Tectonophysics, vol. 306, pp. 345-66, 1999;
International Continental Drilling Program (ICDP), http://icdp.gfz-potsdam.de.
[2] Kola superdeep borehole, http://icdp.gfz-potsdam.de/html/kola/wellsite.html.

D. McGeary and C.C. Plummer, Physical geology: Earth revealed, 3rd ed., Boston, MA: WCB, McGraw-Hill, 1998, p. 63.

J.M. Dickins, D.R. Choi, and A.N. Yeates, 'Past distribution of oceans and continents', in: S. Chatterjee and N. Hotton, III (eds.), New concepts in global tectonics (pp. 193-9), Lubbock, TX: Texas Tech University Press, 1992.

[thackney]

I included a link showing continued increases through 9 km.

Could you provide a little information showing your claim?

[thackney]

http://icdp.gfz-potsdam.de

has links to dozens of sites.

http://www.icdp-online.de/kola/wellsite.html

is a non-working link.

I directed you to the exact page with the chart. Could you please point out where the information is that shows decreasing temperatures and pressures?

[okie01]

Just because people wish the laws of entropy were reversed, they don't actually work that way.

Unfortunately, populists don't think in this way.

Instead, populists are content to blame everything (most especially, their circumstances) on "greedy corporations" and expect the government to protect them and make life "fair".

Populists consider themselves "conservative", for some reason, but in fact they empower liberal government power trips.

[Nathan Zachary]

Works for me.
Yes there are links to dozens of PAGES they are all ICDP pages of several drilling projects. Choose one.

As for your PDF file, It keeps stalling while trying to load, so I can’t even open it to see who wrote it.

Judging by the cartoon pic you posted, I can just imagine.

[Nathan Zachary]

A populist? My my. I'm no "polulist" my friend.

And if anyone empowers the liberal government power trips, it's the evo's who think the earth was populated with trillions of dinosaurs that suddenly all stampeded to big holes, fell in, were buried, and turned into oil wells. And now burning dino juice is causing "global warmng"

[thackney]

all ICDP pages of several drilling projects. Choose one

Fine, first one I picked:
Drilling of IDDP-1 at Krafla continues
http://www.iddp.is/
... started drilling into rocks again, at a depth of 796.7 m,

No help at this one.

- - - - -

next: Deep Geodynamic Laboratory - Gulf of Corinth
http://www.icdp-online.org/contenido/icdp/front_content.php?idcat=826
Final depth: 1001.0 m

Not going to support your claim here either.

- - - - -

Kola Superdeep Borehole (KSDB)
http://www.icdp-online.org/contenido/icdp/front_content.php?idcat=695

Certainly deep enough, no data at this site beyound a couple paragraphs

Several links from this page:
http://portal.unesco.org/science/en/ev.php-URL_ID=4795&URL_DO=DO_TOPIC&URL_SECTION=201.html

Here I find:
European Geoparks Coffee Table Book
Launch of Japan Geoparks Committee
8th European Geoparks Conference, Portugal

But no depth versus temp or pressure

- - - - - -

ANDRILL - ANtarctic geological DRILLing
http://andrill.org/

A single ~1000 meter-deep drillcore...

No help here either.

[thackney]

I haven't made claims oil was created from dinosaurs. You must get your information from cartoons.

But a few centimeters of sedimentation per thousand years, times 400~600 million years does a lot of work, combined with a lot of geological movement by tectonic plates and other forces.

[okie01]

A populist? My my. I'm no "polulist" my friend.

Did I say you were? But, if the shoe fits, wear it.

And if anyone empowers the liberal government power trips, it's the evo's...

Huh?