Why don't they build more refinery's, we have plenty of oil?

Question

we are selling all of our alaska oil to japan because we don't have enough refinery's to make gasoline. there is no oil shortage, just a lack of refinery's to process it!

Answer 1

Show me the money...refiners are raking in big profits by selling their products at extraordinary markups.  Although crude oil prices are not at an all time high, pump prices are.

According to ABC World News (5/22 ABC), refineries claim they are returning those profits to capital investment.  But if that were the case, as any first-year finance student knows, that would cut into their profits.  Profits are the net earnings after taxes, interest, operating expenses, and captial investment are paid out.  

Clearly, the refinery officers, board members, and stockholders are making big bucks at the expense of the consumers.  This is yet another reason for alternative, petroleum free fuels...to cut off the greedy souls who are sapping our economy.

Answer 2

Because we all want cheaper gas, we just don't want the refinery in our neighborhood.  Age old story.

We could at least improve upon or expand what we have.  I saw last night on the news 400 disruptions this year due to fires or other disasters at refineries in the US.  Our production is way down.

I love that Exxon's profits went up 50% last year.  and they say it's due to more demand.  Well, the US demand didn't go up by 50%.  I don't think the whole world could increase demand that much in a year.  If so, we'l run out of oil by 2010!

Answer 3

There are no refineries being built because the government has made it too cost prohibitive.  The fees and taxes associated with building a new refinery makes most companies stay away.  Besides, why spend the money when they can sell the crude and make money??  Also, it would be a few years before the refinery would be ready to operate which does nothing to help the current situation.

Answer 4

When oil companies can artificially keep the price of oil up by cutting back on production, it directly impacts their bottom line.  Their first responsibility is to their shareholders and as such, anything that adds to the bottom line, is what they will do.  Demand is rising, not falling, and supply is falling, not rising.  This combination is when we see $80 a barrel oil.  

Further, environmentalists have such a strangle-hold on congress that even IF someone wanted to build a new refinery, the Governmental Hoops that a company would have to jump through, no one would want to invest in the project.

Finally, no one wants that new refinery in their neighborhoods.  They are ugly, smelly, loud and just all around unpleasant to be around.  By definition, they would have to be on one of the coasts, the West Coast if we are talking about the Alaskan oil.  Oregon, California, and Washington all have said that there is no way any of them are going to allow a refinery to be built on that coast.  This means that we have to come through the Panama Canal.  Canada will not allow a pipeline to cross their country.  (Can't blame them)  Therefore, it becomes too expensive for the oil companies to move all this crude oil around.  Japan is a straight shot out of the Gulf of Alaska and they are willing to pay.  Don't forget, the Oil companies are in business to make money, not spend it.

Answer 5

Your information is incorrect.  We are not selling all of our Alaskan oil to Japan.

We as of May 11, we imported 10,332,000 barrels per day.  We exported 23,000 barrels.  We keep our oil.

The reason we don't have refineries here is all about money.  It is expensive to build evironmentally clean refineries and that is the standard in the U.S.  Other countries would rather take the money and pollute their country.

We now import around 1,500,000 barrels of gasoline each day.  Oil companies wouldn't do that if it weren't profitable.

And speaking of profitable.  If you look at the record earnings of the oil industry, you know that they can afford to build a clean refinery or two in the U.S., but why should they when they can build one cheaper elsewhere without all the hassle?

Do you want a refinery in your neck of the woods, on your river, near your agriculture?

That's why they build elsewhere.

Answer 6

We don't "have plenty of oil"... FACT! Do a google search on Hubert's Peak. There has not been a new refinery built  since early 70's, find out exactly why.

Answer 7

Starring this one - I'd like to know too.

Answer 8

There isn't much of an incentive for oil companies to construct more refineries.  In fact, even the ones they have are shut down on a regular basis for 'maintenance' which seems to coincide with the busier times of the years.

In the 70's they constructed numerous new refineries only to see oil prices plummet and them taking a huge loss from the construction and reduced oil prices.  Now they are happy with current prices and are afraid of what would happen if history were to repeat itself.

Answer 9

They smell bad, so all the local residents lobby their local government to prevent it getting built near them. And they are expensive to build so the oil companies don't want to build any unless they desperately need to.

Answer 10

The real reason we do not have new refineries is the expense of building them.

For a very long time domestic regulations and other factors (including but not limited to environmental regulations) have made it cost prohibitive to build one in the US when you compare with the cost of improving the efficiency of the existing refineries or building them oversees.  In other words, oil companies have been improving the throughput of existing domestic refineries which is substantially cheaper  than building a brand new domestic refinery.   And they have been running them flat out .. as fast as possible to keep domestic production up.

Now refineries do not last forever..  many are 30 years old and need major maintenance  which requires shutdowns.  

We have enjoyed a long period of relatively cheap domestic petroleum supplies.. I am afraid that period is over at least for the time being.

Answer 11

because if you flood the market with available oil, the prices go down and there are apparently some people who don't want the price to go down. It just so happens that those same people who don't want to the price to go down, have some pull with the government and are able to influence their actions on the matter.

Answer 12

Actually, refineries have been expanding capability at existing facilities for years to address the need for more refining capacity. Also, all oil is not the same, so some refineries can process only certain types of oil - one size does not fit all - and this can impact availability. The current lack of refinery capability has a variety of causes. What you often hear from the media and politicians is an oversimplification of the facts. I suggest reading up on the issues from fact based sources that don't have a political agenda.

Answer 13

The US had its last refinery built in 1976 or so.

The main reasons for this are environmental regulations and related lawsuits that run up the cost of building a refinery or bar construction altogether, the objections of people who do not want these smelly and smoky projects anywhere near them and the fact that for many years refineries were not very profitable.  It was much more profitable to find and sell crude than refine it.

Another problem is that oil is not all the same.  Refineries are typically built to process a particular grade of crude oil.  US oil from West Texas is not at all like the heavy crude from Venezuela.  As we run out of oil here, the imported stuff won't necessarily be refinable in existing facilities without major overhauls and modifications.

Also, refineries have often been built near the source of the oil.  The US was once the largest producer of oil in the world and oil refineries were built here to process that oil.  But we have had dwindling oil production, so refineries here are increasingly refining oil imported from other places.  

It is interesting that on the one hand we complain that we want more refineries built while at the same time we want to reduce oil consumption to the level that would make refineries obsolete.  If you were in charge of investing money and had to choose between investing in an oil refinery, which is loathed, or maybe trying to find a better, safer way to invest, which would you do?  I'd skip the oil refinery.

The US actually suffers economically in many ways from not having new refineries.  Lost jobs.  Lost property taxes on refineries.  Lost income taxes as refining profits are taxed by the countries with refineries, not the US.  Increased balance of payments deficits as importing refined products is much more expensive than importing the raw crude oil (imported crude oil costs maybe $60 a barrel, but the imported refined gasoline costs more like $100 a barrel).

Oil producing countries like Saudi Arabia and Kuwait are expanding refinery capacity, but it takes years and billions of dollars to build a refinery.  They want to do so so they can capture more of the profitability from oil -- the refining margins.



By the way, in a curious aside, even Iran has to import gasoline -- due to its lack of refining capacity, it can't refine enough of its own oil production to meet internal demand.

Answer 14

supply and demand

when supply goes down and demand remains the same, prices go up, profit margins of suppliers go up.

when supply goes up and demand remains unchanged, prices go down, and profit margins follow them.

there is no economic incentive for oil refiners to build new refineries, or reopen the ones they closed for maintenance.

in other words:

you are going to continue to pay for high priced gas regardless of whether you want to or not, so why should oil companies help anyone but themselves?