Replies

that schedule assumes that you can get your permits in a timely fashion and that your firm has ready access to a few hundred million dollars

Yes, agreed, I have made some assumptions. But I am referring to expansions at existing refineries. Grass roots refineries are a far different animal. The only grass roots refinery I am aware of, in the USA, is the project in Yuma, Az. which has been around for at least 3 years, maybe more like five. They have just recently been permitted. Construction may begin in 2007, more likely 2008 (if they get funding).

Other grass roots projects in Mexico, Canada and Chile may very well end up exporting their gasoline to the USA.

Generally I agree with you and if you're a regular reader here at FR you know that I'm a staunch supporter of the free enterprise system. But there is one executive in the refining industry who has said a couple of times: "no new refineries will be built in the US in this decade." I find that statement just a little suspicious. Why is that guy so sure that no new refineries will be built? Meanwhile, there's a company that has obtained the environmental permits to build a new refinery near Yuma and yet they can't find investors to finance the project. There's an issue with securing oil supplies for the new refinery for the long term, and I don't know anything about the expected ROI on the new refinery. So I don't know if there's anything unusual about the lack of investor interest so far.

There's no question that oil production is an extremely fragemented and competitive world industry with hundreds of producers, and no company has enough market share to manipulate the price of oil. But the refining industry is more concentrated, with about 15-20 refiners operating in the US. It's essential for fair competition that the current refiners don't do anything to interfere with the construction of new refineries. I'm going to be following the news on this Yuma refinery closely to see if the company finds investors and if not why not. That's a good location for a refinery and I can't think of a good reason why it shouldn't be built.