Conspiracy Theory -- Gas Prices
Interesting slant at
Associated Press:
AP analysis: Firms crimping oil supplies
BAKERSFIELD, Calif. - You'd think it was Texas. Dusty roads course the scrubland toward oil tanks and warehouses. Beefy men talk oil over burritos at lunch. Like grazing herds, oil wells dip nonstop amid the tumbleweed — or even into the asphalt of a parking lot.
That's why the rumor sounded so wrong here in California's lower San Joaquin Valley, where petroleum has gushed up more riches than the whole gold rush. Why would Shell Oil Co. simply close its Bakersfield refinery? Why scrap a profit maker?
The rumor seemed to make no sense. Yet it was true.
The company says it could make more money on other projects. It denies it intended to squeeze the market, as its critics would claim, to drive up gasoline profits at its other refineries in the region.
Whatever the truth in Bakersfield, an Associated Press analysis suggests that big oil companies have been crimping supplies in subtler ways across the country for years. And tighter supplies tend to drive up prices.
The analysis, based on data from the U.S. Energy Information Administration, indicates that the industry slacked off supplying oil and gasoline during the prolonged price boom between early 1999 and last summer, when prices began to fall.
The article (a longish one) goes into a lot of the background details and also talks about the refinery's new owner Flying J of Ogden, Utah:
In Bakersfield, government regulators eventually began to nose around, wondering if Shell hoped to game the market. But the company finally hired an investment banker to scout buyers. In January 2005, it announced a sale to truck-stop operator Flying J, of Ogden, Utah, which also runs a small refining business. The price was kept secret. Shell did nothing wrong, federal regulators later decided.
Since the sale, drillers and refiners have been making profits as never before.
And a bit more:
In Bakersfield, Flying J's 350 refinery workers now process 2.7 million gallons of oil a day — as much as Shell did — in the churning nest of boilers, piping and stacks venting six stories above the scrubland.
"It's still a good refinery, good people, a lot of money to be made in the long term," says Andy Wheeler, the engineering manager transplanted from Louisiana. "There's still plenty of oil locally to produce."
The new owner won't discuss current profits but acknowledges making money. With limited oil from Shell, Flying J has kept its boilers busy with crude from other wells, also right here in the valley.
In fact, the refinery is so full of promise that Flying J has decided to spend several hundred million dollars to nearly double its gasoline output. It hopes to make about $85 million more a year in profit.
"Shell, in the last few years of operation, didn't invest any money into the place," says Wheeler, tooling past its giant storage tanks in his shiny SUV.
But the refinery's new bosses, says manager Gene Cotten, are "comfortable enough with the long-term crude supply to make that investment."
I love the quote: "
Shell, in the last few years of operation, didn't invest any money into the place" Yeah, milk it for all it is worth and sell the remains to someone else to deal with. Still, it doesn't sound like Flying J is hurting and the refinery sounds like it is really busy. Flying J operates a couple other smaller refineries and has a line of truck stops on interstates. Sounds like a forward-looking company.
Posted by DaveH at November 25, 2006 10:51 PM
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