September 21, 2000

Lack of refineries one reason for high prices, oilman says By Charlie Hammer Odessa American

A shortage of refineries and OPECs failure to control supply are pushing oil prices to levels that are bad for the public and the oil and gas industry, area oil experts say.

West Texas Intermediate crude closed at $37.48 on Wednesday. Thats up from Tuesdays closing price of $36.53.

Morris Burns, executive vice president of the Permian Basin Petroleum Association, said the past two years of decreased production are beginning to catch up with the oil and gas industry.

"We are paying the price for the inactivity of the past two years," he said.

"Worldwide consumption is up, but our production is down."

Burns said the recovery of the Asian market has put a strain on the worlds oil and gas supply.

"The thing that put us here is the Asian market," he said. "Now that their economy is up, they need the oil."

Burns said oil companies need to build up their reserves, but this is all but impossible without building more refineries.

"The problem is there are not enough refineries," he said. "There has not been a refinery built since 1976. Weve got a bottleneck at the refineries. Until we get more refineries, we cant refine any more oil."

Burns blames government regulation as the major roadblock to building new refineries.

Jim Henry, president of the Permian Basin Petroleum Association, said OPEC is in the difficult spot of trying to control oil prices with production.

"Its like picking your teeth with a telephone pole," he said. "A little change in production causes a tremendous change in price."

Henry said he believes OPEC will have to take more drastic measures.

"It appears they will have to overproduce to correct it, and then the price will start swinging the other way," he said.

Henry said OPEC is not used to "fine tuning" the oil and gas supply this closely.

"Its difficult, and its affecting the whole world," he said. "They dont want these high prices. We dont want these high prices. No one wants these high prices. We need more control."

Henry said consumers should start getting used to high oil prices because the worlds oil supply is beginning to run low.

"We are running out of oil at this price," he said. "I think $20 (a barrel) will be the average, rather than $15 like it was for the past 100 years."

Burns said oil prices should remain high into the foreseeable future.

"I dont think there is going to be a downturn," he said.

http://www.oaoa.com/news/nw092100g.htm

-- Martin Thompson (mthom1927@aol.com), September 21, 2000

Answers

This guy has absolutely nailed the crux of the problem. It's the shortage of refineries. With no new refineries built in this country since 1976, how can anyone expect anything but an oil shortage, what with the huge growth in our economy since then?

-- Billiver (billiver@aol.com), September 21, 2000.

I enjoy reading these informative articles, and the analysis and interpretation that go along with them, and underscore the high points.

-- LillyLP (lillyLP@aol.co), September 21, 2000.

As I see it, if we don't start easing up on some of these environmental restrictions on refineries, we will soon be importing, not only crude oil, but refined gasoline, as well. Then we will really be dependent on foreign sources for our vital energy needs.

-- Loner (loner@bigfoot.com), September 21, 2000.

So why did we not have this refinery problem two years ago? Why has it suddenly appeared? True, they say the requirement in California has doubled in the last year. So What? That must mean lots of people must have moved from someplace else (hence, reduction of oil comsumption in that community) it means a transfer of demand. Not to bring the whole industry down on it's knees. This isn't brain surgery. How can one with half a brain, fall for this stuff? Did the U.S. population "double" in the last year, so causing the oil industry to fall to their knees? I think not, maybe you should throw off your comfortable blinders, and think for yourself. And start doing research. Your call.

-- Bull Shit and Bolderdash (Refinerybe@dammed.com), September 21, 2000.