Closed Refineries...


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Posted by Brian A. on Wednesday, March 26, 2008 at 21:19:13 :

In Reply to: Re: high diesel prices posted by Todd Wilson on Wednesday, March 26, 2008 at 12:29:19 :

It is true, there are fewer refineries now than there was 25 years ago. When oil got down below $20/barrel many refineries were closed as a cost saving measure. These are still closed for the most part. The increase in supply has come from improved efficiency at the refineries kept open. Most of the closed refineries now are obsolete and would need major investments to bring them back online. But we do not need to build new refineries on new lands, it is still cheaper to refit and reopen the closed ones. The problem is, if you can sell all of your production, raise prices because of limited supply and higher commodity prices, and not have to invest in hiring more people or refitting/maintaining additional production facilities, why would you? At some point they will no doubt feel it is worth their investment to open additional capacity. An additional problem is that the oil companies are essentially running a vertical monopoly. This means a competitor can not just open a refinery, because they would have to get oil from somewhere and sell it to someone and the oil companies control the rest of the supply line. This has been an additional problem for several of the ethanol plants who have had to work out deals with the oil companies.



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