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Posts tagged oil

Delta Bid for Trainer Refinery Gaining Momentum (

When I first saw the news that Delta Airlines was looking at the former ConocoPhillips refinery in Philadelphia I had to do a double-take. An airline running a refinery is just that strange. At first I thought it was a move by Delta to stir up the market a bit but this most recent news makes me think the Atlanta based airline is very serious about buying the facility.

The Trainer refinery is configured to produce a higher yield of jet fuel – about 13 percent of its output, or 23,000 barrels a day (966,000 gallons). Delta could ship the fuel by pipeline or barge to New York, where it has a large presence at LaGuardia and JFK airports.

Delta would ostensibly receive all of the jet fuel from the facility, but would probably swap much of the gasoline and diesel for jet fuel in other locations near Delta hubs.

I am still trying to understand where Delta thinks they will save the money. They will still be buying oil at the market price, the difference now is that they will be a refiner of said fuel. Refining crude oil is not a “value-add” process, it is a necessity. You can’t fly a plane on crude oil.

“The objective would be to achieve a 10 percent price reduction on a large portion of its fuel needs – which, if were achieved, would represent significant savings,” reported Linenberg, the Deutsche Bank analyst.

How? How are they planning to achieve that much of a reduction? Are they simply offsetting their fuel costs by selling the jet fuel on the wholesale market? If so, then how are they financing the operation of the refinery? Refineries are not cheap to operate and certainly not cheap to maintain. As stated earlier, oil companies do not view them as moneymaking facilities but rather, as necessities to compete in the market. The margins in refining are so small that it is hard to make money from fuel alone. Now, maybe if Delta is going to sell chemicals from the facility they can make the revenue that the article hints at.

I would love to have a sneak peek at Delta’s game plan. They must have some kind of strategy up their sleeve to make this work, but they’re going to wait to make it obvious to the rest of us.

The BP spill is bad, I think we all agree about that, but it could be much, much worse. First, a little umbrella so that people do not poop all over this site because they think I am defending BP. British Petroleum and the companies that worked for them on the Deepwater Horizon are definitely responsible for the spill and should be held accountable. Now that that is out the way I can get on with the purpose of this post.

In 1979 a well named Ixtoc I was being drilled in the Gulf of Campeche about 62 miles offshore. At some point in the operation drilling mud circulation was lost and the well experienced a blowout. The blowout preventer was, at the time, not in line with the drill collars, rendering it ineffective. The spill is almost exactly the same except for the fact that Ixtoc I was in 161 feet of water. In the end, Pemex, the national oil company of Mexico and the owner of the well, lost 3.5 million barrels of oil into the Gulf of Mexico. Rather than paying residents on the coast of Texas who had experienced damage or loss of livelihood, Pemex claimed sovereign immunity and spent only $100 million to clean up the spill.

Ixtoc I Spill

The Ixtoc I spill has gone on record as being the worst accidental spill in history (incidentally, the worst spill in history was Saddam Hussein burning the Kuwaiti oil fields). Until the BP leak is completely sealed up and the areas effected by it cleaned, we will not know the full extent of the damage and how it compares to Ixtoc I, but I am going to guess that Ixtoc I will still take the prize as the worst accidental spill in history.

BP could have done the cowardly thing and run away from this spill much like Pemex did in 1979 but they made a conscience decision to clean it and fix it. Sure, their handling of the issue has been less than perfect, but they could have turned tail and run, leaving the British government to decide what to do. I really wish what was reported on the news was not the same old, “worst disaster in history”, not just because it isn’t true, but because it’s sensationalism at its worst.

A lot of folks are calling for the suspension of deepwater or even offshore drilling and I think that is a poor way to go about the future. The Deepwater Horizon tragedy is the first U.S. offshore spill in 40 years. It was the first offshore spill on a rig anywhere in the world in 20 years. These incidents are few and far between and yes, while there should be more rigorous safety checks on the platforms, the idea that getting rid of offshore drilling would completely rid the world of oil disaster one-offs is absurd. Rather than blaming the oil, blame the people who caused the spill and figure out ways to keep it from happening again.

The BP oil disaster has been on everyone’s mind lately and for good reason. We won’t know the full affect on the region for months or maybe years and the spill is another haphazard mistake from BP, the last one being the Texas City refinery explosion. I know BP will clean up the mess, it’s their responsibility (though the federal government by law has a responsibility as well), what bothers me is the chatter on the internet and television about boycotting British Petroleum.

I saw these two things this morning and decided that something, no matter how little audience I get, needed to be written. There seems to be a large misunderstanding of how the industry operates and how people are able to pump gasoline into their cars each and every day. I aim to clear that up, if only by a little bit.

First, it needs to be known that oil is traded and sold at a very fast pace all day long. Because of this, refineries share crude oil, or feedstock. This type of sharing allows the refineries to be constantly supplied and making end products. Some refineries only make more feedstocks, usually for chemical plants. Others produce gasoline and diesel fuel and chemicals. The gasoline that is produced is moved to terminals that are located all over the country in strategic places. These terminals are privately owned and are essentially holding facilities for gasoline. There is no segregation of brand at these facilities, just stockpiles of fuel.

The local gas stations then send their trucks to the terminal to buy a load of fuel for sale at their station. En-route to the gas station the truck driver may mix an additive to the fuel depending on what brand it is being sold under (Chevron, Shell, etc.) and then pump the fuel into the underground tanks at the station. What you end up with is the exact same gasoline at every station, minus the additives. There is no discernible way to know where your gasoline came from. Even though a gas station has a BP logo, Shell may have been the one to refine the oil.

The same essentially goes for other oil based products.

What is the point in all of this? Well, the idea that one can boycott BP and make it go under is based on the false premise that one can distinguish BP gasoline from any other. In all of this, people are looking for someone to blame, to make pay and they’ve understandably gone after BP. However, at the same time, these same people could actually be making a difference by volunteering to help clean birds or scoop up crude. But, I guess it’s easier to attempt to boycott something that is near impossible to boycott rather than actually doing something.

This week’s links are a real hodgepodge of different stories.

  • Marine F/A-18 Pilot Had Chance to Land Before Crash – A disturbing article on the F/A-18 that crashed near San Diego, California and killed four members of a family. The investigation has revealed that the pilot had a chance to land the aircraft before the crash but continued on to Miramar. There is no reason he should not have landed.
  • Hot Doug’s in Chicago, IL – I bookmarked this so I would remember to visit when we are there in April. The Duck Fat Fries sound amazing.
  • Why the Kiddie Food Movement has got to go – I think it is great that kids are involved in cooking and reviewing food but the author is spot on in noting that children do not have refined palettes. The appreciation of food flavors can take place when one is young but the body has not fully developed taste buds or the brain power to understand depth in food.
  • Let’s Get Real About Renewable Energy – Robert Bryce takes a closer look at hydrocarbons and energy consumption in the U.S. He comes to the conclusion that simply moving to renewable energy is not something that is attainable in the short term.
  • Burying Power Lines Proves Costly as Hurricane Protection – This has been a heavily debated topic in Houston and other Gulf Coast areas. I knew that burying power lines was expensive but I did not realize it was this expensive. To bury the lines in Houston, it would cost $28 billion. The damage caused to the grid in the last ten years by tropical weather has only been $1.8 billion. Sure, they should bury some lines that are necessary to keep large portions of the city with power, but overall, leave them overhead, I’ve dealt with no power for two weeks, I can do it again.