Oil Falls Below $97

It dropped a whole whopping 10 cents here, big deal.

 

We have an infrastructure that is just as dependant on gasoline as it is on electricity. Electrical power suppliers have their profits limited because of our dependence on them.

 

That's sort of true, but not accurate.

The oil refineries on the Texas coast had some damage, but their biggest problem is that they lost quite a bit of the supporting infrastructure that allows them to refine oil. All refineries need electricity to operate, and there is at least one major power plant, the Sabine Power Plant, on the Upper Texas coast that has literally been under water. This plant supplies electric power to all of the refineries in the Beaumont/Port Arthur area, and possibly Lake Charles, Louisiana.

When the plant is flooded, they cannot produce electricity. When they cannot produce electricity, hundreds of thousands of people in the Beaumont/Port Arthur area don't have power... at that includes the refineries.

So the refineries are out of action until they get power, fresh clean water, and a steady supply of gases like nitrogen and hydrogen.

Furthermore, once they get these things, it will be several days after they restart the refinery before they will have gasoline and other petroleum products to sell, since some reactions and processes take several days.

Of course, this assumes that they have a way to receive crude oil shipments (what are the conditions on the docks? Not good.), employees to operate the refinery (most of them have been evacuated and cannot return until electricity, the water system and the sewer systems have been restored - not to mention dealing with damage to their own homes), and a way to distribute their products (pipelines must be checked, roads must be cleared, and docks must be functional).

Not only that, the refineries have had to deal with some massive expenses. They had to shut down (takes a couple of days and involves burning off unrefined products in the system - did you notice all of those burning flares in the news reports?) as well as cleaning out all of the piping. Furthermore, before they start everything up, they have to carefully inspect everything or they could have explosions and/or deaths from equipment that did not appear to be damaged.

About 20% of U.S. oil refining capacity has been out and only some of it is coming back online. The refiners have incurred major losses from having to burn potential product in the system and also have had high labor costs to pay for employees to perform difficult but necessary jobs without creating any product.

I grew up in the Beaumont/Port Arthur area and know the current situation on the group fairly well because of friends and family members who still can't return to their homes. Also, my father, grandfather, two uncles, a great uncle, my brother, and a number of friends worked at the local oil refineries. I know a little bit about what is involved in shutdowns and startups because of strong hurricanes (that's about the only thing that ever shuts down a refinery, and they don't always shut them down during weaker storms because of the tremendous costs involved).

 

Bill O'Reilly doesn' t have a clue.

 

It's surprising it has dropped at all, given how tight the supply of gasoline is and will be for the next month or two.

 

>We have an infrastructure that is just as dependant on gasoline as it is on electricity. Electrical power suppliers have their profits limited because of our dependence on them.

At least in Washington State, regulated utilities have their profit margin guaranteed to them. You want to guarantee the profit margin on gasoline sales? Then increased wholesale costs would automatically be passed on to the consumer.