Wednesday, May 25, 2005


Energy Bottleneck

From the Wall Street Journal, we get a level-headed but pessimestic assessment of the short-term energy situation. The usual suspects - increased demand and lack of refining capacity - get the blame.

What's interesting about the capacity issue is that, despite huge refining margins right now (and not-exactly-embarassing ones in the past), no one is building additional capacity. While environmental regs and NIMBY reactions are supposedly the reason, doesn't anyone think there's a way around these problems if the petroleum companies really thought they could make money? Not to oversimplify, but it seems that both problems could be overcome with refinaries built outside the US. It seems to be that one could logical draw the conclusion that oil companies don't see a long-term reason to build additional refining capacity, but then again I'm a bit negative when it comes to energy issues.

As I would agree that building refineries abroad sounds like a logical solution, it's bad PR. Just like sending nuclear waste to another coutry.

"We don't want the polutions and risks here, build your filthy business somewhere else. We'll take the gas though"

Oil companies probably use regulations as a good excuse to not boost capacity and enjoy higer price/margin from higher demand and flat supply.

And all interested parties will keep quiet about the other solution from the other end of the spectrum: comsuming less. Nobody wants that: demand would ease, supply would augment, prices (and profits!) would drop. Can't have that! We need more oil!
not to mention the difficulties of bringing in refined oil in all its forms into the U.S.

though I guess refining in Mexico would more or less solve this problem, I'm going to assume the import tarriffs on refined oil are much higher than for unrefined oil.

I agree though, if there were money to be made oil company's would build a new refinery in the States, but I have a feeling they've been "taxed" out of this possiblity.
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