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Banned
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I ended up posting the "Part II" of this thread's OP, here:
http://www.tfproject.org/tfp/showpos...4&postcount=22 .... except for this part which is actually a summary of the both parts of the OP, except for the part about Chevron deciding to spend $2 billion buying back it's own common stock, at the same time, just a few hundred miles south of it's San Ramone, CA corporate HQ, the city of Long Beach waits to drill new oil wells in a field of proven commercially viable petroleum deposits, because necessary expertise and oil drilling equipment are not available...
Quote:
http://www.washingtonpost.com/wp-dyn...112500956.html
AP Analysis: Firms Crimping Oil Supplies
By JEFF DONN
The Associated Press
Sunday, November 26, 2006; 12:13 AM
Storage tanks at the Flying J oil refinery in Bakersfield, Calif., sit beyond old oil pumping equipment Oct. 12, 2006. The refinery is so full of promise that Flying J has decided to spend several hundred million dollars to nearly double its gasoline output. It hopes to make about $85 million more a year in profit. (AP Photo/Damian Dovarganes) (Damian Dovarganes - AP)
BAKERSFIELD, Calif. -- You'd think it was Texas. Dusty roads course the scrubland toward oil tanks and warehouses. Beefy men talk oil over burritos at lunch. Like grazing herds, oil wells dip nonstop amid the tumbleweed _ or even into the asphalt of a parking lot.
That's why the rumor sounded so wrong here in California's lower San Joaquin Valley, where petroleum has gushed up more riches than the whole gold rush. Why would Shell Oil Co. simply close its Bakersfield refinery? Why scrap a profit maker?
The rumor seemed to make no sense. Yet it was true.
The company says it could make more money on other projects. It denies it intended to squeeze the market, as its critics would claim, to drive up gasoline profits at its other refineries in the region.
Whatever the truth in Bakersfield, <h2>an Associated Press analysis suggests that big oil companies have been crimping supplies in subtler ways across the country for years. And tighter supplies tend to drive up prices.</h2>
The analysis, based on data from the U.S. Energy Information Administration, indicates that the industry slacked off supplying oil and gasoline during the prolonged price boom between early 1999 and last summer, when prices began to fall.
The industry counters that it's been working hard to meet untiring demand. It faults output quotas set by Mideast oil powers, global competition for oil from booming economies like China's, and domestic challenges like depleting wells, clean-air rules, and hurricanes. They do make things harder.
Yet the AP analysis found evidence of at least an underwhelming industry performance in supplying the domestic market, when profits should have made investment capital plentiful:
_During the 1999-2006 price boom, the industry drilled an average of 7 percent fewer new wells monthly than in the seven preceding years of low, stable prices.
_The national supply of unrefined oil, including imports, grew an average of only 6 percent during the high-priced years, down from 14 percent during the previous span.
_The gasoline supply expanded by only 10 percent from 1999 to 2006, down from 15 percent in the earlier period.
The findings support a conclusion already reached by many motorists. Fifty-five percent of Americans believe gas prices are high because oil companies manipulate them, a Pew Research Center poll found in October.
<a href="http://www.washingtonpost.com/wp-dyn/content/article/2006/11/25/AR2006112500956_2.html">Page 2</a>
Even in Bakersfield, which lives off oil, many suspect that the industry goes easy on supply for its own reasons. "They ain't trying: that's more money for them," snorted JaRayle Madden, a construction worker filling up his little sedan recently at a local Shell station.
This fast-growing city of 300,000 shuddered in November 2003, when Shell confirmed it would soon close its local refinery. Plant workers, consumer activists and public officials rose up in resistance, firing off letters and demanding meetings.
The 70-year-old refinery only produced 2 percent of California's gasoline and 6 percent of its diesel fuel. Yet opponents feared its demise would push up prices in the tight markets all along the West Coast.
In these circumstances, surely the plant was worth something to someone, if not to Shell. After losing $57 million mostly in the aftermath of the Sept. 11 terrorist attacks, the refinery was making money again, Shell acknowledged.
Though set back temporarily by the attacks, the oil business has profited handsomely since then. For example, the biggest six refiners _ Shell is only No. 12 nationally but powerful in California _ rang up $400 billion in profits since 2001, according to the consumer group Public Citizen and corporate reports. Even compliance with complex clean-air rules hasn't spoiled business.
The industry also protected profits by not building any new refineries, instead expanding existing ones when it could.
Shell portrayed its Bakersfield refinery as old and unfit. One executive said there was "simply no longer an adequate supply of crude oil" nearby.
Drillers across the country complain of maturing wells that are slowly running low. Gas or liquid is sometimes injected into reservoirs at higher cost to keep up the flow.
"The industry is working very hard," says Joe Sparano, who heads the Western States Petroleum Association representing Shell and other drillers, refiners and marketers.
However, oil reserves are expected to last for decades around Bakersfield and elsewhere, according to industry and government estimates. Fresh national reserves are found each year. To make up for older wells, oil companies regularly drill new ones _ about 9,800 last year. Underground discoveries and technological strides have kept domestic reserves at the same level as in 1999.
With demand growing, though, the United States has imported an expanding share of its oil from abroad _ and quotas kept by Mideast nations do lift its price.
<a href="http://www.washingtonpost.com/wp-dyn/content/article/2006/11/25/AR2006112500956_3.html">Page 3</a>
....Imports were impractical at inland Bakersfield, Shell explained. Lynn Laverty Elsenhans, the head of Shell Oil Products US, said the refinery here just wasn't viable anymore.
"For this reason, we have not expended time or resources in an attempt to find a buyer and do not intend to do so," Elsenhans wrote to U.S. Sen. Barbara Boxer, D-Calif.
Shell's blunt tone began to trouble opponents of the plan. Union officer Ed Huhn, a former refinery worker who was trying to keep the place open, began to wonder if it was folly. "They were trying to discourage anybody from buying it," he says.
Skeptics like U.S. Sen. Ron Wyden, D-Ore., got more vocal. They began to suspect that Shell wanted to shut the refinery to sell pricier gas from its bigger refineries elsewhere in the region. By taking a hit at Bakersfield, maybe Shell could come out ahead.
"They were trying to squeeze the market in every possible way," Wyden insists.
Shell spokesman Stan Mays denies that. He says it's "impossible to speculate" on whether Shell would have profited from closing the plant.
But he indirectly acknowledges that Shell didn't intend to make the refinery attractive for a competitor: "Who's going to want to buy it? We're not going to give crude supply with it."
It turns out that the industry exerts quite a bit of control over supply.
For one thing, it decides to invest in new wells and refining equipment _ or not to. Though reserves have kept pretty steady, the oil industry taps those resources to varying degrees from year to year. The long price run-up first took off as the number of new wells abruptly dropped by a total of 59 percent in 1998-99, federal records show.
One consumer advocate, Mark Cooper, refers to industry-induced supply bottlenecks as "strategic underinvestment." He views references to "discipline" in annual corporate reports as a code word for going easy on supplies.
<a href="http://www.washingtonpost.com/wp-dyn/content/article/2006/11/25/AR2006112500956_4.html">Page 4</a>
AP Analysis: Firms Crimping Oil Supplies
....In Bakersfield, government regulators eventually began to nose around, wondering if Shell hoped to game the market. But the company finally hired an investment banker to scout buyers. In January 2005, it announced a sale to truck-stop operator Flying J, of Ogden, Utah, which also runs a small refining business. The price was kept secret. Shell did nothing wrong, federal regulators later decided.
Since the sale, drillers and refiners have been making profits as never before.
The back-to-back hurricanes along the Gulf Coast in 2005 crippled about a third of the country's oil-output capacity and a fifth of its refining _ but only temporarily. For all its talk of supply challenges, the industry quickly arranged for more imports and avoided outright national shortages. But prices jerked upward.
In Bakersfield, Flying J's 350 refinery workers now process 2.7 million gallons of oil a day _ as much as Shell did _ in the churning nest of boilers, piping and stacks venting six stories above the scrubland.
"It's still a good refinery, good people, a lot of money to be made in the long term," says Andy Wheeler, the engineering manager transplanted from Louisiana. "There's still plenty of oil locally to produce."
The new owner won't discuss current profits but acknowledges making money. With limited oil from Shell, Flying J has kept its boilers busy with crude from other wells, also right here in the valley.
In fact, the refinery is so full of promise that Flying J has decided to spend several hundred million dollars to nearly double its gasoline output. It hopes to make about $85 million more a year in profit.
"Shell, in the last few years of operation, didn't invest any money into the place," says Wheeler, tooling past its giant storage tanks in his shiny SUV.
But the refinery's new bosses, says manager Gene Cotten, are "comfortable enough with the long-term crude supply to make that investment."
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Quote:
http://findarticles.com/p/articles/m...4?tag=rel.res1
Flying J plans to double gas output
Deseret News (Salt Lake City), May 9, 2006 by Robert Tuttle Bloomberg News
Flying J Inc., a refinery operator and fuel distributor, said it plans to double gasoline production at the Bakersfield, Calif., plant it bought from Royal Dutch Shell Plc last year.
Ogden-based Flying J has been obtaining permits to expand the refinery's gasoline and diesel output, the company said Friday in an e-mailed statement. The upgrades are scheduled to be completed by the middle of 2008, the statement said.
Shell originally planned to close the refinery, saying the plant was losing money. It sold the facility to Flying J in March 2005. Flying J will spend $500 million to upgrade its refinery, the Los Angeles Times reported last week.
"A move like that, to put that type of investment to revamp this type of refinery speaks volumes," James Cordier, president of Liberty Trading Group in Tampa, Fla., said Friday in a phone interview. "It appears that the industry is of the opinion that high prices will be with us for a while."
Flying J's Bakersfield refinery can process 70,000 barrels of crude oil a day. In addition to gasoline, the upgrades will boost diesel production by 15 percent, the statement said.
In 2004, the U.S. Federal Trade Commission investigated whether Shell's planned closure would violate antitrust rules by reducing competition in California.
Flying J had sales of $7.3 billion in 2004, according to a statement on the company's Web site.
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Top grade crude oil reached $125 per bbl today, and I submit for consideration that at least two major oil companies, Shell Oil and Cheron-Texaco, have demonstrated that they are not nearly committed enough to investing in the recovery or refining of oil in the US, not even in the lucrative and high and still growing demand California market, where Chevron is headquartered and where crude oil can still be relatively cheaply drilled for and recovered and transported to the limited local refining operations.
These companies aggravate price and supply in the US, and cause avoidable foreign purchases of both crude and distilled product to be made and shipped from foreign sources, to supplement the lack of availability of these commodities inside the US.
They lobby heavily for US government subsidies, even as they fail to commit themselves earnestly and truthfully to exploring for and refining petroleum in the US. One can only wonder, by the examples I have presented, whether they make similar decisions to avoid investing as much as they are able to in finding and refining more petroleum, outside the US. Big oil has demonstrated that it is not truthful, so it is rational to distrust what they say, vs. what they do.
It is rational to cease depending on them to provide reliable supply to the US market at the best price. It seems to be in the best interests of US voters to press elected officials to seize the domestic assets of these rogue major oil companies, because oil product supply is too important to leave to these demonstrably untrustworthy executives to continue to manage.
The "free" market has failed to operate as anticipated. Rising prices have not resulted in enough of an incentive to expand investment in obtaining and providing an increasing supply.
It cannot get more expensive or unreliable than Shell Oil and Chevron have been observed trying to make the US petroleum market. The investment banks, mortgage companies, and the US banking sector have all been caught in the past year, doing the same fucking thing....undermining the stability and integrity of their own industries for short term gain.
Why would taking their businesses sway from them, in exchange for a legally determined, taxpayer funded compensation, not be a rational reaction to this bullshit?
Last edited by host; 05-09-2008 at 02:19 PM..
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