Gas didn't climb as much as oil, why do you expect it to drop as much as oil?
Posted on 06/11/2012 8:21:52 PM PDT by jyro
Gas didn't climb as much as oil, why do you expect it to drop as much as oil?
Good information Joe, and I agree with your analysts in general, but what is your opinion, or anyone else who may know, about the pump prices when you take into account that the last new refinery built in the United States was Marathan Ashland’s in Garyville, La. It was completed in 1976.
Now take into consideration that the US population in 1976 was only 218 million, yet as of today June 1, 2012, the population is 313 million. That is 100 million, or 43% more Americans. All things being equal in comparison, that means we have about 43% more of almost every category of people living today. 43% more babies, 43% more college students, 43% more families etc. etc. etc.
However, most importantly, that means 43% or more cars being driven. Think about that, 43% more Americans that need to be transported around than we did in 1976, yet we are supplying gasoline for those vehicles with the same amount of refineries as we did in 1976.
Oh and do not tell me we need Mass transit, it will never work in America.
(Plus, that does not include the 15 to 25 million illegals driving around causing hell.)
Now add in the fact that almost every state has numerous grades of gasoline mandated by different state statutes, it does seem to point to a very limited supply of gasoline for us. Even when you consider the current output in oil production. The way I see it, we could pump a trillion barrels of oil a day, but if we do not start building more refineries, the pump prices will never get back to below $2.00 a gallon.
Does anyone have information concerning the correlation between pump prices and refinery petroleum production vs the correlation between pump prices and oil production?
Seems to me the lack of refineries is actually a bigger problem than the lack of oil production. Am I wrong?
There is no refinery shortage. We refine more petroleum products, including gasoline and diesel, than we consume within the US.
We have not built a new refinery lately, but we have been upgrading and expanding the existing refineries, connected to the existing pipelines for crude and products, for decades.
Petroleum Product demand (not including natural gas liquids.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTPUPUS2&f=M
Refinery Capacity
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MOCLEUS2&f=M
Refinery operations
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MOCGGUS2&f=M
The result of this surplus capacity, we import more crude oil than we need, and export surplus refined product, helping the trade balance, keeping some available surplus available and more jobs in the US.
The data is available at the link below. If you need help digging through the data I will answer questions. You won't find a direct comparison, but the tables are available for all the data sets you describe.
http://www.eia.gov/petroleum/data.cfm
You won't find a correlation to production, because the production rates don't change quickly or much at all month to month (in total).
You will find a better but not exact match of gasoline to crude oil price. Crude oil moves more volatilly and more frequently and higher movements. But they trend together.
If the number of refineries does not effect the price at the pump as much as I think because you say we have enough refineries already, then why is it every time an accident happens at a refinery that forces them to shut down production those of us in the distribution area for the petrol coming from that refinery are forced to endure higher prices.
If, as you say, we have enough refineries, then a plant shutdown, or the many changes they make every Spring and Fall for different grade petrol, should not effect the price like it always does.
In California at least, they keep attempting to build new refineries or even enlarge the existing ones, just to have the left stop them via lawsuits, liberal judges, and the EPA. They are having a tough time in California just upgrading and maintaining the ones that exist.
I have thought about it. In 1976, for instance, one of the Muscle/luxury cars was the Olds Toronado which got a whopping 4 MPG in town. Otherwise, 16-17 MPG was considered good, in fact real good, and twenty miles to a gallon was reserved for little critters like Fiat 600s and Volkswagons, and on this side of the pond, the Vega and the Pinto. (I drove or rode in all 4 of those.) Now, though, after CAFE standards and revisions, and computerizing automobiles to the point where few shadetree mechanics can do much with them, 20 MPG is more the norm for a sedan, the new classes (compared to 1976) of Minivans and SUVs generally do as well or better than full sized cars used to (15-20 MPG), and a significant portion of the vehicle market has shifted to diesel (more on that in a minute).
So more vehicles are getting farther on less fuel.
Keep in mind, it isn't just the number of cars, but the miles they are being driven, and the Obama economy has an effect with far fewer people commuting to work.
In addition, those driving on diesel, are driving on a fuel more easily produced (before additives) than gasoline: diesel is a distillate, and a functional diesel fuel can be cooked out of crude oil with only a topping facility. There was a plan to build one of those in Western ND, send the light fraction of the crude one way (napthalenes), the heavy fraction in another direction, both as refinery and/or chemical plant feedstocks, and use the diesel locally. So diesel takes a fraction of the refinery plumbing and processes that gasoline does, fewer blends are needed, and less infrastructure. More diesel vehicles (especially light vehicles which get good mileage) means less gasoline to produce, too.
Another factor is that as much as 10% of the gasoline out there isn't gasoline, but ethanol, which is blended fairly close to point of sale because of its hygroscopic (water absorbing) nature, corrosion problems it would create in pipelines, etc.
Existing refineries have been expanded, which makes more sense than building separate new facilities as existing transportation hubs and infrastructure already go there. The bottleneck comes when there isn't enough capacity in the system as new sources of supply are found, which is why the Keystone pipeline was important, not only for Canadian producers, but for American ones, too, who would have been able t take advantage of some of the excess capacity.
Oh and do not tell me we need Mass transit, it will never work in America.
Don't worry, I live in North Dakota. There are places along coastal urban corridors where it might provide a means to move some of the population, house homeless, and nurture criminal activity, but not here. We do have Amtrack going through, but you can't get there from here, and require connecting changeovers to go someplace. I won't do the TSA grope thingy, and the nearest bus station is in another state. Fuhgeddaboutit.
We drive.
One thing you left out, though, is that pump prices have to support the refits refineries have had to undergo to remain compliant with ongoing moving-target EPA regulations. People who support those regulations and then complain that gas is "expensive" shot themselves in the foot. Unfortunately, we all have to suffer a bit for that.
Quick recap: Prices are the result of many factors, among them:
Multiple blends tailored toward specific areas.
Drilling costs on the rise which is reflected in refinery bid, and if it isn't, drilling will slow down and eventually stop (which will cause the price to go back up as supply drops).
Moving target regulatory standards imposed by the EPA.
Ethanol blending, and ethanol prices.
Transportation costs (the trucks and trains have to buy fuel, too).
Does anyone have information concerning the correlation between pump prices and refinery petroleum production vs the correlation between pump prices and oil production?
Thackney probably does, if anyone has those handy.
Seems to me the lack of refineries is actually a bigger problem than the lack of oil production. Am I wrong?
Believe it or not, we are exporting some refined products. Prices are set by bid in that market, too, like any of the other traded commodities. They then go down the wholesaler to retailer chain, and the retailer only makes enough from a load of gasoline to buy the next one, plus a very small profit. If it wasn't for the convenience store, or in (nowadays, more rarely) the service bays and towing, a lot of them would not be able to make it on just fuel sales.
The US in total has enough refineries to more than meet our demand.
Individual area have more or often less than the local demand. There is not surplus pipeline capacity and extra pipeline miles to shift production from one normal area of distribution to another when there are major extended unplanned refinery shutdowns.
Thanks, you both have done an admirable job of educating me on this sector.
I have a brother-in-law who is in ND working in the field right now. He runs the computer system that controls the fracking drill. He is a huge supporter of natural gas. I talk to him from time to time, and I have learned a lot about the way fracking works.
I don’t get much time to talk to him, because when he does get a chance to call he and my wife (his sister) will talk for an hour about family matters, but when I get a chance to talk to him I pump him for as much information as he can offer from his vantage point in the industry.
He has been in the field so much that he rarely has time to contact us. He was asked to move to ND, but he would rather stay in Wyoming and travel as needed. In his zeal to make as much as he can to hedge against future slowdowns that inevitably always happen, he hasn’t taken any vacation time in over two years. He will take someones shift in a heartbeat, so the overtime pay he makes is very good.
It helps that he’s a bachelor, so all his money he is raking in, he has been averaging well over $100.000 the last two years, belongs to him and him alone. It has enabled him to almost paid off the spread and home he purchased in Wyoming back a few years ago.
Well thanks again you two. I now know more than I did before, and that is always a good thing.
You can probably answer this: Why don’t they build refineries closer to the supply i.e. the need for the Keystone and other pipelines?
Because it is cheaper to continue to use the existing refineries connected to the existing refined products pipeline s and petrochemical complexes.
It is far cheaper to build one crude oil pipeline that pipelines that connect the many different products to the markets. In the Gulf Coast Region we also have other inputs to the refinery such as hydrogen pipelines, natural gas and power lines. Sulfur is produced from the refinery as it is separated out the crude. Many produce petroleum coke as well. Just not a lot of markets for these in North Dakota.
Placing the refinery at the Bakken or Fort Murray eliminates one transportation problem and creates a dozen others.
Thanks.
The price of gas continues to yo-yo, it’s called the market. As long as world prices remain high, US production will rise.
Thanks jyro.
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