[Vision2020] The Price of Gas

[B.C. Strand]

Bill London wrote:

>B-
>could you speculate about the lack of refinery facilities?
>given the huge profits that oil companies reaped of late, it could not be
>caused by lack of capital.  is it lack of planning?  a goal of forcing the
>US government to soften regulations?  a goal of gaining favorable tax status
>from US Government for investment in refineries?
>BL
>
>  
>
Bill,

As part of my work over the past several years I have been analyzing 
energy pricing. The limit on US refining capacity has always been 
evident. However, I have always accepted this as an "existing 
constraint" and have not researched the reasons extensively. Having said 
that, as an engineer I've always assumed that it is the capital cost 
that has been prohibitive. Refineries are incredibly capital intensive. 
This is the reason they have concentrated on increasing yield of the 
existing refineries.

My personal opinion is that the oil companies will use this issue as a 
way of softening environmental standards for new refineries as well as 
tax breaks from the states and communities that they base new 
operations. They will argue that they cannot always count on these type 
of profits and that they need protectction for the capital investments. 
If they don't get this, they will install refineries outside of the US 
and then there will be strategic issues.

But this is only speculation.

Bill Strand