U.S. Oil Refineries Hit by "Invisible Hurricane"

Robert Farago
by Robert Farago
u s oil refineries hit by invisible hurricane

Given hurricane Katrina's impact on our gasoline supplies, why hasn't the federal government taken action to assure America's oil refinery capacity? Today's New York Times reports that an "invisible hurricane" of mechanical breakdowns at oil refineries around the country has pushed-up gas prices 50 cents, to over $3 a gallon. Analysts reveal that a third of the country’s 150 refineries have reported operational disruptions since the beginning of the year. As this website has pointed out, the U.S. refining industry is hamstrung by a patchwork of state regulations that make shifting supply nearly impossible. The industry says the laws and questions about maintenance schedules put it in a no-win position. “Refiners want to keep running in today’s economic environment,” said Charles T. Drevna of the refiners association. “But when they shut down they are accused of gouging the system. When they don’t, they are criticized for overrunning their facilities.”

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  • Stuntnun Stuntnun on Jul 23, 2007

    since the early seventies theres only been one permit requested to build a new refinery-why would they want to any way? it will lower the price of gas:) and for standardizing fuel blends -why did gas go up here in Minnesota during hurricane Katrina when our blend was different than the southern states, and our oil comes from Canada-a dirty blend thats hard to refine-we don't ship it south -the oil company raised it because they new people assumed we share oil with southern states--we don't-they point to the futures market and say see thats market value-yes but not for this area,it was unaffected by the hurricane and they don't refine the sandy oil and we get up here.

  • Stuntnun Stuntnun on Jul 23, 2007

    forgot to add the refinery im speaking about was paying 4 dollars a barrel at the time

  • Borderinsane Borderinsane on Jul 23, 2007

    There aren't enough refineries; and there is little spare capacity to utilize. The US has been a long-time importer of fuel for years; mainly because refiners are either unable to improve existing process plant or make new refineries. Multiple comments embedded below. @John: Supply is tight. The US DOE EIA shows that refiners are operating at about 91% utilization per their "US Weekly Supply Estimates" report. The pricing mechanism for gas is controlled primarily by the NYMEX RBOB contract. Price movement on the RBOB is reflected at the pump within 3 or 4 weeks; adjusted regionally for EPA- and State-regulated blends and local refinery capacity. @hippo: Sure, the price of commodities when measured in EUR, CAD, JPY, or GBP is inflated, but not by that much as when counted in USD. The economic explanation is that the USD economies are facing huge inflation, reflected in the foreign exchange rates. Some economists say there is a lot of inflation baked-into the US economy already reflected in commodity prices; and I expect that those inflation pressures will show in the US economy over the next 18 months. @stuntnun: No-one prohibits you from buying stock in oil companies and getting in on their profits thereby avoiding getting "scammed". Though, one study I read shows that publicly-traded oil company operating profits over the past 40 years are below the average for all equities. Even the last 5 years: ExxonMobil at 9% has a lower average profit margin for the last 5 years when compared to other companies, like Microsoft (27%), McDonalds (11%), and Procter & Gamble (12%). No one seriously says that McD's is gouging you for a BigMac, or P&G for a box of Tide. Also, the price of fuel in MN is only partly determined by local availability. Again, the pricing of the RBOB commodity contracts is the primary control of the price of gasoline in North America. MN's supply of fuel is contiguous by way of reformulators and pipelines to North American supply; so any supply disruption over "there" will affect everyone in North American.

  • Redbarchetta Redbarchetta on Jul 23, 2007

    Once again Pch101 is right on the money. There are upwards of 300 formulations for gasoline in this country and it can change from one county to another. California is the biggest offender. Simple mandating that all the supply of gasoline meet ONE standard in this country would save us all the most money and way quicker than any other solution like building a refinery that can take anywhere from 5-10 years to complete.