Comments on: Refining the Oil Pricing Question http://blog.techfun.org/2008/06/refining-oil-prices/ Linux, Politics, Whatever... Thu, 10 Jun 2010 19:23:20 +0000 hourly 1 http://wordpress.org/?v=3.1 By: Techfun http://blog.techfun.org/2008/06/refining-oil-prices/comment-page-1/#comment-731 Techfun Fri, 13 Jun 2008 19:41:37 +0000 http://blog.techfun.org/?p=764#comment-731 They CAN make it from any grade but the refining process is longer and more complex with the lower grade oil. I know that as of when Hurricane Ivan knocked out a lot of our offshore drilling platforms in the Gulf we had NO US refineries that could handle the low grade stuff. There may be some being built now but given US corporate culture most will see it as cheaper to pay that premium for the light sweet crude than the cost of retrofitting an existing refinery or building a new one. Refineries are nasty and heavily polluting facilities and US EPA guidelines make it very difficult to get new facilities zoned so that doesn't help either. As far as the price change at the pump reflecting the futures price it makes good business sense. If you have a stock of a product, and you plan to sell that product for the foreseeable future, you must sell it for a price that reflects its replacement value plus your overhead plus your profit. If crude oil for August delivery is at record levels, the gasoline wholesalers are going to reflect that in their current prices, and your local station will reflect that at the pump. They CAN make it from any grade but the refining process is longer and more complex with the lower grade oil. I know that as of when Hurricane Ivan knocked out a lot of our offshore drilling platforms in the Gulf we had NO US refineries that could handle the low grade stuff. There may be some being built now but given US corporate culture most will see it as cheaper to pay that premium for the light sweet crude than the cost of retrofitting an existing refinery or building a new one. Refineries are nasty and heavily polluting facilities and US EPA guidelines make it very difficult to get new facilities zoned so that doesn’t help either.

As far as the price change at the pump reflecting the futures price it makes good business sense. If you have a stock of a product, and you plan to sell that product for the foreseeable future, you must sell it for a price that reflects its replacement value plus your overhead plus your profit. If crude oil for August delivery is at record levels, the gasoline wholesalers are going to reflect that in their current prices, and your local station will reflect that at the pump.

]]> By: Will http://blog.techfun.org/2008/06/refining-oil-prices/comment-page-1/#comment-730 Will Fri, 13 Jun 2008 19:26:02 +0000 http://blog.techfun.org/?p=764#comment-730 If it is Oil "Futures" prices, why does it immediately affect pump price? Too bad there is not a way to get the refineries to be able to produce gasoline from the lower quality crude. I also wonder how much of the oil in places like ANWR is of the grade needed to make fuel for our cars and trucks? Wills last blog post..<a href="http://willtaft.com/health/non-stick-cookware-safety/" rel="nofollow">Non-Stick Cookware Safety</a> If it is Oil “Futures” prices, why does it immediately affect pump price?

Too bad there is not a way to get the refineries to be able to produce gasoline from the lower quality crude.

I also wonder how much of the oil in places like ANWR is of the grade needed to make fuel for our cars and trucks?

Wills last blog post..Non-Stick Cookware Safety

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