Refineries Are Closing Again

February/07/2012 16:53PM
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Swiss refiner Petroplus Holding recently filed for bankruptcy. This would make 1.5 million barrels of capacity on both sides of the Atlantic to close. Experts say there is four million barrels of excess capacity at the end of 2011. That is predicted to be 10 million by 2016.

What does that mean to you and me? First, we have had a few refineries close in the US as I have written about in prior blogs. With surplus global capacity imports will keep downward pressure on refining margins here in the US. That’s a good thing for we consumers, but could be a bad thing for the future.

Only the biggest and most sophisticated US refineries will survive a long margin squeeze. Taking refining capacity out of the country means we not only have foreign oil dependence but will have more foreign finished product dependence. The world’s only recourse against Iran is their lack of refineries. Cut off the imports of finished hydrocarbons and their economy dies.

I don’t have a solution. I don’t want government involvement in domestic refining. I don’t want tariffs on refined fuel imports. But, I don’t want the US to become dependent on Saudi refineries for fuel. With the big boys getting out of the refining business in the US, it’s less likely their surviving buyers will have deep enough pockets to survive a long narrow margin period.

Lot’s of things are going in a bad direction for our future refining independence. And, our government is devoid of intelligence on this subject on both sides of the aisle. There are busy looking for ways to take credit for lower fuel prices if they come.

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