Gasoline in California - Page 3

cruiter · 05-20-2007, 08:21 PM

Pam
Thank you,
And how many have been shut down??? When I typed the above, as I was typing, a report came on Fox news talking about just that!!!

Pre-Katrina, the same thing was happening every year just prior to Summer drive season. Oh, and they were talking refineries then too. Yea, we lost a lot of stuff during the storm, but planning years ago could have eliminated this problem. By all accounts, the world is awash in the black stuff. And we haven't built the 1st refinery yet in this country for the massive amounts of oil shale we have. Reportedly more that could be processed than all the known oil reserves in Saudi Arabia. But the enviornmentilists don't want an ugly hole where they don't live anyway. Maybe it'll be a pretty hole at $7.00 per gallon.

Jim

Quote:

Originally Posted by pam

This of course, doesn't address the question of why, given their huge profits, no new refineries have been built in the last - what - 30 years?
Pam

Desert_Seg · 05-20-2007, 11:14 PM

Quote:

Originally Posted by pam

This of course, doesn't address the question of why, given their huge profits, no new refineries have been built in the last - what - 30 years?
Pam

Ah, but that's an easy one.

On average it takes more than 15 years to build a refinery, a lot of this delay due to the extensive approval process and the NIMBY mentality. Furthermore, as I mentioned in my earlier post, refineries have been expanding their facilities and in doing so have introduced more capacity than if they had built the refineries.

Finally, oil companies have only had large profits in the last few years. I don't remember hearing anybody offer to give them more money during the years when they didn't have these large profits.

You also have to understand that these large profits are based on gambles they made many years ago, building contracts that allowed them to pull oil out of the ground at a cheap price for xx years. Could they have anticipated that oil would jump to more than $60 a barrel? No, but now is the time for them to reap their rewards.

It's easy to jump on the "chicken little" bandwagon but once you know the facts it all begins to make sense.

Steven

Desert_Seg · 05-20-2007, 11:45 PM

Quote:

Originally Posted by cruiter

...but planning years ago could have eliminated this problem.

How can you plan for a once in a lifetime storm? How can you build refineries when communities won't let you? You can expand, which is what they are doing.

Quote:

Originally Posted by cruiter

By all accounts, the world is awash in the black stuff. And we haven't built the 1st refinery yet in this country for the massive amounts of oil shale we have. Reportedly more that could be processed than all the known oil reserves in Saudi Arabia. But the enviornmentilists don't want an ugly hole where they don't live anyway. Maybe it'll be a pretty hole at $7.00 per gallon.

I love it when folks talk Oil Shale. Yes, oil shale resources world wide are huge, conservatively estimated at over 2.5 trillion barrels with about 40% of that in the US.

However, crude oil (petroleum based) is still cheaper to extract and produce (at least as of now) because of the HUGE costs associated with mining and extracting the "oil" from shale. In fact, at present there are only a few financially viable oil shale deposits in the world, usually in places with very low labor costs (China and Brazil are two that I remember).

If I remember correctly, the last time oil shale was mined in the US it only produced around 35 gallons of oil for every TON of rock, making it something like 7 times more expansive than petroleum oil. However, since that time technologies have improved dramatically so...

Oil shale does provide a huge alternative to petroleum-based oil. We (the US) have, by far, the world's largest reserves and, by many accounts, the RICHEST deposits. However extraction is still expensive although there are some very intriguing new methodologies being developed.

The worst part of oil shale extraction is that it requires open-pit mining making it a huge environmental problem, both because of the "construction" pollution and the massive use of water. Extraction also creates a huge eyesore, and, most bothersome, a huge health problem since the waste rock is a known carcinogen. Are you sure you want this in your neighborhood?

But there is good news. Shell has been developing a process called 'in-situ' recovery wherein they build a freeze-wall (freezing the ground around a field) and then heat the ground inside the freeze-wall (the field) in order to recover the oil. While there are signs this will be cheaper to recover than petroleum based oil, (by about 40%), there remain environmental problems that have to be rectified that then increase the overall cost of recovery.

Simply put, petroleum-based oil is still the cheapest to recover and the US is still one of the cheapest places in the world to buy gas.

Steven

cruiter · 05-21-2007, 08:46 AM

As the info copied from the Rand research page below shows, a lot is being done now. As Steven said, it's costly but more research is promising and could really reduce or eliminate our dependence on foreign oil. See below.

"The Oil Shale Resource Base
The Green River Formation, which covers parts of Colorado, Utah, and Wyoming, has the largest known oil shale deposits in the world, holding from 1.5 to 1.8 trillion barrels of oil. Of that, roughly 800 billion barrels are recoverable — more than triple Saudi Arabia’s proven oil reserves. Present U.S. demand for petroleum products is about 20 million barrels per day, so 800 billion barrels would last for more than 400 years if oil shale could be used to meet a quarter of that demand.

Oil Shale Technology Prospects
Two processing approaches are available for producing shale oil — mining followed by surface retorting and in-situ retorting. The current state of the art in mining appears to meet the requirements for commercially developing oil shale. The technical viability of surface retorting technology has been demonstrated, but large-scale testing will be required to develop scale-up information for first-of-a-kind commercial plants. As for costs, a first-of-a-kind commercial surface retorting complex is unlikely to be profitable unless real crude oil prices are at least $70–$95 per barrel (2005 dollars) over the operating life of the plant.

As for in-situ retorting — heating oil shale in place and extracting it from the ground — Shell Oil Company has successfully conducted a small-scale field test based on slow underground heating using electric power. While larger-scale tests are needed, Shell anticipates that this in-situ method will be competitive at crude oil prices in the mid-$20s per barrel.

A design base for a full-scale commercial surface retorting plant or an in-situ operation is at least six years away. Assuming the private sector decides to invest in oil shale development and production, we expect that an oil shale industry capable of producing more than a million barrels per day is at least 20 years off.

Benefits of Shale Oil Production
Assuming a national production level of 3 million barrels per day, direct economic benefits in the $20 billion per year range are possible, with roughly half going to federal, state, and local governments. Also, production at this level would likely cause oil prices to fall by 3 to 5 percent, saving American oil users roughly $15 to $20 billion annually.

A multimillion barrel per day industry would also yield a few hundred thousand jobs in the oil shale producing areas and in regions that contain industries that provide inputs to the production process.
As for national security, the principal value of oil shale production would be its contribution to a portfolio of measures intended to increase oil supplies, reduce oil demand, and weaken the geopolitical power of oil-exporting countries".

KSagal · 05-21-2007, 09:30 AM

As with all things, there are politics to deal with.

There are many technical reasons that things happen, but there are far more political barriers than people think. The world is run, and this is far more evident in the United States than some other places, by beaurocrats, not engineers.

We can look right to our own Segway Inc for this. The engineering is king, yet the machine has not reached it's potential on this alone.

FInding oil technology is not enough. Good engineering is not enough.

When we watch a great performance, of any kind, the greatness is in the flow, in the seamless movement from what we know and expect to what we did not even know was comming.

When a magician does a good trick, it is seamless. We cannot separate the magic from the reality. When we see a good athlete, it is not that they are fast, or fearless, it is that they make it look easy and natural. When we hear really good music, it is not the notes, but the way the notes, and all the rest are seamlessly fitted to our moods and the the way we are made to feel. The more performers make it look easy and natural, the more we appreciate it.

When engineering is best, is when it is almost invisible. People in the fifties were impressed with big and fantastic. Now people are impressed with the subtle. That NIMBY thing is alive and well, everywhere. That is fought by hiding things. Make things look like they belong, and people do not rise against them.

At this point, shale oil extraction is not yet there. It will go there when the dollars are right.

I believe that one of the reasons that the segway is so special is because it looks so plain. It is a simple thing that works in a non-simple way, and does a technologicaly advanced thing, but does it smoothly and seemingly simply.

Just my two scents...

pam · 05-21-2007, 09:47 AM

Well, you think YOU know the facts (and I believe that you take this on good faith), but I'm not convinced that this is true. It's good political-speak, and good oil-company-speak, but I'm not sure it's the truth.

I don't know of a single building it takes 15 years to build, or a company. And oil company profits have been excellent for years, not just recently. And people have been complaining for years. <G>

Chicken little? Not me. Just seeing it as it appears to be.

Pam

Quote:

Originally Posted by Desert_Seg

Ah, but that's an easy one.

On average it takes more than 15 years to build a refinery, a lot of this delay due to the extensive approval process and the NIMBY mentality. Furthermore, as I mentioned in my earlier post, refineries have been expanding their facilities and in doing so have introduced more capacity than if they had built the refineries.

Finally, oil companies have only had large profits in the last few years. I don't remember hearing anybody offer to give them more money during the years when they didn't have these large profits.

You also have to understand that these large profits are based on gambles they made many years ago, building contracts that allowed them to pull oil out of the ground at a cheap price for xx years. Could they have anticipated that oil would jump to more than $60 a barrel? No, but now is the time for them to reap their rewards.

It's easy to jump on the "chicken little" bandwagon but once you know the facts it all begins to make sense.

Steven

Desert_Seg · 05-21-2007, 12:39 PM

Quote:

Originally Posted by pam

Well, you think YOU know the facts (and I believe that you take this on good faith), but I'm not convinced that this is true. It's good political-speak, and good oil-company-speak, but I'm not sure it's the truth.

I don't know of a single building it takes 15 years to build, or a company. And oil company profits have been excellent for years, not just recently. And people have been complaining for years. <G>

Chicken little? Not me. Just seeing it as it appears to be.

Pam

Pam,

I take nothing at face value. I love doing research and will spend countless hours trying to prove or disprove something.

- Building refineries. I used to run the region for a company that was involved in the oil field business, including providing support for Saudi Aramco, British Petroleum, and a few others. 15 years for a new refinery build is nothing...and in the US is in no way untoward because of the approval process and number of lawsuits that accompany any refinery build application.

- Refinery production. At some point last year there were around 130 refineries in the US with the capacity to to refine ~17 million barrels of petroleum per day (this is not all refined into gasoline, mind you). Compare this to 25 years ago (1981) when we had over 320 refineries with a total capacity of just over 18.5 million barrels per day. In that time, we cut the number of refineries by approx 60% and yet only decreased our overall refining capability by less than 8%. Not bad, I say.

- Profits. Do you know how much it takes to build a refinery? Between $2.5 and $3 BILLION, not including any environmental impact fees that have to be payed or put in escrow. Furthermore, Morgan Stanley has estimated that it costs THREE times as much to find and develop oil fields as it did in 1999. They also estimate that, on average, oil companies will invest $1.5 BILLION per month EACH in finding new fields, money that they may never recoup.

- Production - Today I went to the Energy Information Administration website (http://www.eia.doe.gov/) and looked at the average weekly US refinery GASOLINE output for the last 1, 3, 5, 7, 10, 15, and 20 years and compared them to the average over the past 6 weeks. The numbers are (in barrels of GASOLINE per day):

Last 6 weeks: 8,748,666
Last year: 8,866,846
Last 3 years: 8,735,936
Last 5 years: 8,616,524
Last 10 years: 8,357,450
Last 15 years: 8,027,434
Last 20 years: 7,697,032

A couple of things leap out. Our overall gasoline output has increased by more than a million barrels per week in 20 years and while the overall output over the past six (6) weeks is low compared to last year's average, this output numbers has going UP steadily over this period.

I then decided to compare the output for the second week in May during the last 10 years. The numbers are (I added the trailing zeros):

2007 9,053,000
2006 9,177,000
2005 8,965,000
2004 8,909,000
2003 8,610,000
2002 8,639,000
2001 8,475,000
2000 8,385,000
1999 8,319,000
1998 8,149,000

What do you see? You see a RISING number of refined barrels of Gasoline every single year except 2007. The decrease this year? It's virtually negligible and all "experts" tie it to the spate of refinery accidents that have occurred in the past year.

Sooooooo, the big scare factor being put out by the press isn't so scary after all.....and the sky isn't falling either.

Steven

KSagal · 05-21-2007, 01:28 PM

Bandiing all these numbers about is one thing, but what is the real impact of all this expense on the US and other economies?

I recall when I was in Europe 20+ years ago, Gas was very expensive compared to the US prices. (I lived there for a couple years, so had the opportunity or need to be aware)

On subsequent trips to Europe, even though there for shorter trips and using rental cars (You really feel the impact of this kind of expense over longer exposure, in my opinion) I did not notice as much of a price gap...

Over the past 20 years, the price has surely gone up significantly. Far more than other expenses...

My question is this, when a commodity doubles in price, as gasoline in the United States has in the last 5 years, that money has to come from someplace.

The oil companies are posting record profits. Largest profits of any companies, any time, any where, in the history of the world. This money is comming from someplace...

I am not arguing that they are doing something wrong. IF they have traditionally had a 8% (made up number) profit on a gallon of gas at the pump, and are seeing that same 8%, but the cost has doubled, so the 8% is a much higher amount of dollars, so be it. This profit I am not complaining about.

So, I don't care if the Billions of dollars are fair, or earned, but they do exist, and they used to be in other parts of the economy. Are people cutting back in other areas? I believe the sale of SUVs are down. Is this so? Are people buying not only smaller cars, but cheaper ones? Is that where those Billions and Billions of gas profit dollars are comming from, the new car market?

Do people go out to eat less? Is the profit comming from the Restaurant food industry? Are people eating more Chuck steak, instead of sirloin? Buying clothes at Target instead of Neiman Marcus?

My concern with these prices, and the market manipulation to keep them this high, has to do with the redistribution of the spending capital of this country, and the world. What was a lot of money that was well dispersed, is pooling in a smaller space, that offers less return. The further that money is dispersed, the more people who derive value from it...

I am not a conspiracy guy. I like the open market. I don't think this is a game played to make people drive less, or make trains more profitable or any thing like that. I would not be too surprised if the government is trying to social engineer some changes, or to incite change thru forced pocketbook pressures, regarding green house gasses, or some other less than obvious objective, but that would not be my first thought...

I believe that there is not a clearly open market. There are cartels, back room deals, and lots of politicing.

One last point. I don't doubt for a minute that there could be 10 or 15 years involved in a new refinery...

I am on the Zoning Board in my town. It is typical for apartment complexes to be more than 2 or three years from site assignment thru permitting to construction. Often 3 to 5, and that is just for appartments. We have a medical lab that wants to make a very specific medicine for certain cancers, but there is a radio-active component, a very short halflife (Weeks) and they have been in the building and permitting process for 3 years now, and the building was already built. It just takes that long for clean rooms, congtingency plans, and all the agencies to weigh in. (This medical lab will make less than a gallion of product per week, and has less than 5 gallions of waste (Innert in 2 weeks) on site at any time and these are the times involved.

I can imagine the task involved in some adventure that includes millions of barrells of oil...

Desert_Seg · 05-21-2007, 02:35 PM

As almost always, very well said. A couple of comments...

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