Gas Pains

Note: many of the problems are with BP, the green, "Beyond Petroleum" company ...

NYTimes: Gas Prices Rise on Refineries’ Record Failures

By JAD MOUAWAD
Published: July 22, 2007
Oil refineries across the country have been plagued by a record number of fires, power failures, leaks, spills and breakdowns this year, causing dozens of them to shut down temporarily or trim production. The disruptions are helping to drive gasoline prices to highs not seen since last summer’s records.

These mechanical breakdowns, which one analyst likened to an “invisible hurricane,” have created a bottleneck in domestic energy supplies, helping to push up gasoline prices 50 cents this year to well above $3 a gallon. A third of the country’s 150 refineries have reported disruptions to their operations since the beginning of the year, a record according to analysts.


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Some critics of the industry have theorized on Internet blogs that the squeeze on gasoline and other refined products points to a deliberate effort among oil companies to bolster profits by keeping supplies tight. But experts point out that the companies have little incentive right now to hold back on fuel supplies.

“Every refinery would like to run as much crude as possible but they simply can’t,” said David Greely, senior energy economist at Goldman Sachs, who in a recent report compared the drop in domestic refining with an “invisible hurricane.” “These are more complex systems. There are more chances for things to go wrong. And when things go wrong, they tend to back up the system.”

Meanwhile, refiners have been scrambling to meet a raft of environmental regulations, phase out toxic additives, add ethanol to the fuel mix and introduce new ultralow sulfur standards for gasoline and diesel. Industry insiders attribute much of the fragility of refining operations to the difficulty of making these cleaner fuels.

Refiners spent $9 billion from 2002 to 2006 to make low sulfur diesel. But producing these cleaner fuels means processing crude oil more intensely through the refining process, at higher pressures and temperatures. This, in turn, leads to more chances for glitches or breakdowns, refiners say.

"All this is happening as the industry goes through another golden age. After 20 years in the doldrums, the refining business has never been so good for oil companies. Refining margins — the difference between the price of crude oil and the value of refined gasoline made from it — have shot up as much as $25 a barrel for some types of crude oil, compared with about $5 a barrel just a few years ago.

But with a third summer of high gasoline prices, lawmakers are debating legislation they claim would punish oil companies for exploiting the tight supply situation and engaging in “price gouging.” At the same time, they are pressing refiners to produce more fuel.

“Refiners want to keep running in today’s economic environment,” said Mr. Drevna of the refiners association. “But when they shut down they are accused of gouging the system. When they don’t, they are criticized for overrunning their facilities.”