Posted on 06/29/2019 9:14:36 AM PDT by Hojczyk
Philadelphia Energy Solutions (PES) Opens a New Window. is saying it wants to permanently close its oil refinery, one of the oldest and largest refineries on the East Coast, after an explosion and massive fire. The refiner had the capacity to process 335,000 barrels of oil per day or the equivalent of 14 million gallons and is one of the largest suppliers of gasoline on the eastern seaboard. The event caused substantial damage to its building complex and caused the financially struggling refiner to say enough is enough.
This is a situation that has already caused gasoline prices to go up in the Northeast and may cause a domino effect across the nation. As of late June, the national average gas price was down 19 cents year-over-year and expected to drop even lower, according to AAA and averaging around $2.70 per gallon. In Pennsylvania, the average is higher around $2.90.
Philadelphia Energy Solutions had just recently emerged from bankruptcy and was trying to make a comeback as sub-par refining margins and stricter environmental regulations that have made it very difficult to make money. In fact, the government had to forgive Philadelphia Energy Solutions some relief on some renewable energy credits they were forced to buy, that the company said helped drive them into bankruptcy in the first place.
Bad regulations on Renewable Fuel Credits caused the firm to lose millions. The government let them off the hook because they feared that if they lost that refinery, it would drive up gas prices and hurt the consumer. Yet now the company wants to walk away because the cost to rebuild the units that were destroyed is simply not worth it.
(Excerpt) Read more at foxbusiness.com ...
Almost every US Refinery has expanded capacity and add additional processing over the past 50 years. A number of them are expanding right now. Economy of scale is at work, it is much better for a company to expand an existing Refinery than build a brand new one.
If building a new one, it is not just the cost of the Refinery, which is huge. It is training a new workforce, getting new pipelines and dock facilities established, tank farms and distribution, electrical supply, steam supply. Then there are the availability of contract workforce for turnaround maintenance.
Ive wondered if this is something else Trump should address, since if my memory serves me correctly, that no new refineries have been built since 1975 (due to government policy).
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Yes, the government should have a special tax on solar and wind energy sources and use those funds to subsidize new refineries and carbon based power generation. These can be called RELIABLE ENERGY TAXES/CREDITS. And Im not being sarcastic.
>>> In fact, the government had to forgive Philadelphia Energy Solutions some relief on some renewable energy credits they were forced to buy, that the company said helped drive them into bankruptcy in the first place.
Did it help PES on the public relation with Greenies?
No. They are still being viewed as ‘Big Oil’ lumped with “Big Pharma” as public enemy #2 (Trump is #1).
Anyone out there who really understands the refinery business?
How can any firm be “struggling” when no new refineries are being built, an oligopoly controls the US market, in local markets they have near monopolistic power, the barriers to new competitors are extremely high, and they can pass high government regulatory costs completely on to the consumer?
Someone help me understand this please.
*Renewable Energy Credits &
*Renewable Fuel Credits?
If that refinery closes, and the refining margin (or crack spread, the difference between oil costs and value of refined products) rises, it benefits other refineries.
For you stock guys out there, I’m increasing my long-time positions in PSX, VLO, and (newer) MPC. In English, that’s Phillips 66, Valero, and Marathon Petroleum.
How can any firm be struggling when no new refineries are being built, an oligopoly controls the US market, in local markets they have near monopolistic power, the barriers to new competitors are extremely high, and they can pass high government regulatory costs completely on to the consumer?
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Refineries are not like your local gas/electric company which CAN pass the costs on to the consumer. If their costs are higher than the market price of their end products they are stuck with a loss.
Some may say: “So what. With all those brand new modern refineries coming on li........... Oh, there AREN’T any new refineries. Well at least we have wind and solar to make up the............. Oh, you CAN’T make plastics from wind by products?”
and closed the plant!
Ping!
Bring Alberta aboard, all energy needs will be met.
affect
I always get that one wrong.
It's a tricky word.
The way I keep track of the difference is to think of Cause and Effect. The word Affect is always Cause (prime mover), while the word Effect us almost always Effect (end result).
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