Originally Posted By: LTVibe
Originally Posted By: Colt
http://www.latimes.com/business/la-f...,5317635.story
"Refineries will have to be closed," said Fadel Gheit, senior energy analyst with Oppenheimer & Co. "Unless this excess capacity is permanently shuttered, a recovery in refining margins is unsustainable."
Gheit is correct.
The oil industry has to reduce refining capacity just like GM had to reduce factories and manufacturing capacity. They can't keep production high when consumption is low.
We've criticized the 'old' GM for being inefficient, so why should we expect oil companies to run their business inefficiently?
Keep in mind that much of the expense of running refineries in the US is due to high taxes and Federal regulations. We should blame the Feds for refinery shutdowns and higher gas prices before we condemn the oil industry.
No one said they had to, or should, keep capacity ramped up to peak output. Obviously they need to curtail production if the holding tanks are full. However, there is a huge difference between curtailing production and permanently closing/destroying/dismantling/etc... refineries as they did before. When they do that, and demand increases, they then use not enough capacity as an excuse to drive prices up. There is proof they did this previously so that when demand rose so would profits. They are doing it again. This isn't about a drop in profit now( anyone who thinks the gas companies are losing money neeeds to go see a shrink or something )it is all about what they can do to really rake it in down the road like last time.
They need to just keep production capacity low and ride the bad times out like we all have to do and then increase output as demand increases. If they want to see an increase in demand then call out the speculators that drive crude and refined products to heights that are unreasonable. Demand is low because the price is too darned high! Instead they are trying to stick it to us even further by getting rid of more capacity now( with low demand as an excuse )so when times eventually do get better they can rape us again because they have yet another artificially/manipulated shortage of capacity and product.
I am no genius but this is pretty clear and easy to see. Here is what I consider to be a good analogy...
You don't disband your army entirely during peace time because there is no need for it. God help you if you do and something happens and you need that army. You can lower the standing number of men, moth ball some equipment, increase reservists, etc... so you can quickly come back to full force if needed. A country needs to have the ability there to rise up and meet whatever threat comes their way quickly. If the army was just allowed to disband and all the equipment was destroyed it would take too long to rebuild and train recruits to meet any threat. The same applies to refining capacity. If they are allowed to permanently get rid of some of these refineries god help us all when demand rises. IT will be impossible to meet it and impossible to build new refineries. They know this and are planning on it!