Five years ago companies were looking for ways to cut refinery output

[redqueen]

Posted this in another thread, which sank, but in light of the oil prices surging I thought this might make for interesting reading material.

http://www.gasandoil.com/goc/news/ntn12961.htm

17-06-01 While the Bush administration cites a lack of refineries for energy shortages, internal oil industry documents show that five years ago companies were looking for ways to cut refinery output to boost profits. It takes about four years to build a large refinery so any substantial additional new capacity from new plants would have had to begin by the mid-1990s, energy expert acknowledge.

But internal industry documents obtained by Sen. Ron Wyden, D-Oregon, suggest that in the mid-1990s oil companies had no interest in building new refineries because of low profit margins and, in fact, were discussing the need to curtail refinery output to boost profits. "If the US petroleum industry doesn't reduce its refining capacity, it will never see any substantial increase in refinery margins (profits)," said an internal Chevron document in November 1995.

The memo cited warnings given about refinery profits by a senior analyst from the American Petroleum Institute, the industry trade group, at an industry conference that year. API spokesman Jim Craig said, "We don't know about these alleged internal company memos, but the idea that the API would warn member companies on profits is ludicrous." A year later, an official at Texaco, in a memo marked "highly confidential," called concerns about too much refinery capacity "the most critical factor" facing the refinery industry - resulting in "very poor refining financial results."

The Texaco memo, written in March, 1996, concluded that "significant events" were required to deal with the excess refinery capacity problem and suggested one solution might be to get the government to lift clean air requirements for an oxygenate in gasoline. Removal of the additive would require more gasoline to be used in each gallon of fuel, tightening supplies.

(more)

Source: AP

[DarkPhenyx]

1. Most curious....

....and yet completely unsurprising. It isn't like we would expect an industry to do something to hurt it's profits, or cause it lose stock price. While it is an interesting bit of information I'm not really all that upset about it. What else would you expect a profit driven company to do?

[redqueen]

2. Not surprising in an era of lassiez faire business regulations

However someone had posited that the reason refinery capacity hadn't increased was due to environmental regulations.

Ha!