Our Thorny Oil Patch

IBD ^ | March 13, 2008

[Kaslin]

Energy Policy: When America's biggest oil refiner contemplates putting almost a third of its refineries on the market, Congress should sit up and take notice. The business climate it has created is hurting our economy.

---

Valero Energy Corp. is an industry leader that refines more oil than any other in the U.S. The San Antonio, Texas, company had a good run in the stock market this decade, rising 1,400% before earnings topped last year. But it's no longer so easy for the company or any refiner.

Valero will probably sell three of its 17 refineries this year and maybe two more later to focus on its core operations amid what CEO Bill Klesse acknowledged on Tuesday is a weak economy.

But maybe that's because the environment for the energy business in the U.S. has turned downright hostile.

Upstream, oil drilling is off-limits, crimping supply and driving prices ever higher. Downstream, refiners are hit by not only high energy prices, but also bureaucratic regulations, environmental lobbies and special interests that make moving to Asia, where economic growth is still valued, more attractive.

The sorry fact that no new refinery has been built in America since 1983 has been cited so many times that we would have thought someone in Washington would have done something about it by now. But no — it just keeps getting worse.

[Racer1]

Oh I agree with you on the carbon credit scam, the thin margins and environmental regulation which is sometimes a good idea. Thats why I said it is tough to run a refinery, but todays CEOs and their salary teams are squeezing manufacturing to the point of no return for personal profit (bonuses).

[Jacquerie]

Ethanol is the government’s favorite child. Each gallon of ethanol is supported with a $0.50 tax credit and $0.51 tariff. Our ethanol program would make an old Soviet Commissar of Agriculture proud.

[palmer]

They seem to have no problem getting past all the enviros,

That's because ethanol is Good and oil is Bad.

[thackney]

Valero plans $2.4 billion Port Arthur refinery expansion
http://www.mysanantonio.com/business/Valero/stories/MYSA022808.valero.EN.7dfef86.html
02/28/2008

David Hendricks: Valero’s strategy aids bottom line
http://www.mysanantonio.com/business/Valero/stories/MYSA030108.01D.hendricks.2e111e7.html
02/29/2008

[gogogodzilla]

You’d think that our oil companies would have long since realized that a generous supply of oil and it’s refined products keeps the consumers happy.

And that when that doesn’t happen, the consumers get cranky. Cranky consumers who then complain to Congress.

Furthermore, you’d also think that our oil companies would realize that ANY time Congress gets involved in ANYTHING, they royally screw it up.

But no, they don’t ever connect the dots. Which is why we’ve had Congress royally screw up our oil industry repeatedly over time.

If I ran Valero, I really wouldn’t want government interference - so I’d do whatever necessary to keep them out.

Course, that’d mean that I’d increase the company’s oil production and refining capabilities to slightly exceed demand... but hey, what do I know?

It’s not like I’ve got a PhD in business or economics or nuthin’. So I must be wrong.

Yep, Valero is doing a much better job than I ever could! Selling off capabilities, drawing government attention... wooo, I’d never have thought to try that.

Silly me.