Refine This

This article should put to rest all of the same tired arguments that our gas problems would just magically disappear if we could only build more refineries. This quote from U.S. Energy Secretary Sam Bodman:

Bodman said that a spate of US refinery outages that slowed US gasoline production are no longer to blame for rising crude oil prices, with the nation’s refineries running at more than 93 per cent of capacity.

“We can no longer explain (high oil prices) here in this country on the basis of refinery problems,” Bodman said.

For some time now, there has been a coordinated effort to attempt to lay the blame for high gas prices on the environmental lobby, by making the absurd claim that environmental hurdles make building a refinery “too costly”. I think I even read someone try to justify record profits by the oil companies by pointing to the small margins, and contrasting that margin to that of a chain restaurant’s mark-up on a cheeseburger. Something tells me there isn’t a restaurant anywhere on the planet that sells 100’s of millions of cheeseburgers a year.

The oil companies can well afford to build more refineries. They don’t for the same reason other companies, not bound by our environmental laws, don’t… it isn’t a matter of lacking the ability to convert crude oil into gasoline, at any price, but the rapidly diminishing amount of oil left underground. Why invest billions in a refinery when there is at best a 40 year supply of oil left to refine? I think we are seeing the “diminishing return” reality at work.

This sort of transparency by an official of this administration is refreshing to see. How long before he is sacked?

h/t John Lamb



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8 responses to “Refine This

  1. I just don’t get this head-in-the-sand mind-set that says we need more oil, more refineries, etc. We’re running out. What’s the point of investing in a refinery when there won’t be anything to put in it 50 years? That moned needs to be invested in other energy. Hell, even a nuke plant makes more sense.

  2. MONEY not moned.


  3. The weird thing, Beale, is that Hubbard got it right once, and I tend to think that the unexpected demand from China and India will accelerate our plunge into the “second half” of world oil supply. Yet, there is SO much resistance to this theory, as if believing it will somehow make one immediately suffer a reduction in lifestyle. Like I said, I have kids, I WANT to way way wrong here. I see NO data to support the claim that I am.

  4. Mack, can you give a little more insight on the whole “shale oil” thing I’m hearing about? There are many who think this is the answer.

  5. Well, OK, Tart, I’ll try. As of now, even though Shell Oil has been steadily renewing it’s patent for a “new” kind of shale extraction, they are no where close to figuring out how to actually do it, it’s a just theory at this point. Eventually, it all comes down to diminishing BTUs,and, the quality of energy we extract vs the cost to extract it.

    Last April, Business Week did an article about a mass car production facility that will be able to produce cars to be sold in China and India for around 2500.oo each. Thats ALOT of new drivers, standing in lines at the pumps. We are a wealthy nation, Ginger, so we may well be one of the last countries to feel the effects of an increased cost of fossil fuels. Some countries have already dropped off the oil infrastructure grid, for lack of diesel fuel to run their generators. (Hospitals in these countries routinely suffer power outages, and pre-mature babies are at risk, many die.)

    No, the effects of a decline of cheap oil may not be a Madmax scenario, but there will be a day, a very long day, of reckoning for the irresponsible usage of the earth’s natural resources. When we burn through the natural gas, and coal, and trees, our children or their children will wonder if we knew, and what we did about it. Just sayin.

    But Hey! We still got the Preds!

  6. Here is another take on it, from a blog I read from time to time:

    Peak Oil is not the point when “oil runs out”. In fact it is the opposite. It is the point in time when the most oil ever is produced.

    Nobody knows when global Peak Oil will occur because a sizeable portion of the world’s top producers keep their data secret. It does them no good, but they seem to want to keep the arrangement. Saudi Arabia is the most important oil producing country that falls into this category. It is also the worlds most important oil producer.

    Oil production has remained static since October 2004 at approximately 84 million barrels per day. Maintaining oil production means that new oil producing projects must be brought on line faster than older fields are depleting. This seems a simple enough concept, but lots of people have trouble understanding that point. For instance, Canterell in Mexico, the second biggest field in the world and the source of much of the oil imported into the US declined 20% in 2006. The North sea declined about 8%. Saudi Arabia declined 8%. Just these three production areas total over 1.5 million barrels per day in lost production with Saudi being the most important.

    What this means is that if existing production is declining at 5% per year (a conservative number, considering Canterell) that means that the same amount of oil that is being produced now must be found again in new dicoveries and field overhauls to achieve the projected demand of 120 million barrels per day. This just is not going to happen.

    More disturbingly, it looks like Saudi is at that point in it’s depletion curve when the decline is still accelerating. It could be 1m barrels down in 2007. Canterell, the North sea and all the others are also still declining as well. We will know later this year if Saudi is in permanent decline. If so global Peak Oil will already have happened and life will get interesting.

    A million barrels a day is a lot of oil. There is no chance, absolutely none, that oil shale will produce that kind of production any time soon, if ever. Nether will any of the other imposters such as ethanol from corn. But that’s another story.

  7. I don’t read the “Michael Moore types” regarding Peak Oil. The guys I read are all former oil executives or energy traders, and they make more than a compelling case. It ain’t light reading, kiddo, and I’ll admit to being lost a good part of the time, but there is no arguing with the science, IMO.

    Note: But I do love me some Michael Moore. Anyone that works a blue collar job should too.

  8. This is great information, and you explained it very well, fwiw.

    Question: If our demand (or current production) is 84 million barrels per day, and the three largest producers–Canterell, Saudi and the North Sea–are down 1.5 million per day–couldn’t we tap in to one additional source to make up for that 1.5 million (which is fractional compared to the 84 million). Isn’t there another place we could drill that we aren’t currently tapping in to now to make up for that?

    You would think we could somehow.

    But here’s my take on the whole thing when folks start shooting down this (your) viewpoint: Even if we could tap in to alternative sources, do the whole shale oil thing, etc., what harm could possibly come from conserving, living simpler, and being better stewards of our planet? I believe that greed will destroy our civilization unless a serious reprioritization does not occur.

    Even a Tart knows that… 😉

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