Ashland exec: U.S. faces new fuel crisis

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Ashland exec: U.S. faces new fuel crisis By Bob Driehaus, Post staff reporter

America stands on the brink of its first energy crisis since the Gulf War, according to the head of Covington-based Ashland Inc., a major U.S. oil refiner.

''America is entering its fourth energy crisis,'' Ashland Inc. Chairman and Chief Executive Officer Paul W. Chellgren told The Post in an interview at Ashland's headquarters.

''I think we're in for more (price) spikes, higher prices, and more volatile prices.''

Past crises arose when the supply of crude oil was cut short by war or political turmoil: the Arab oil embargo in the early 1970s; the fall of the Shah of Iran in 1979; and the Gulf War in 1990.

But the emerging crisis won't be solved by boosting crude oil production alone, Chellgren said.

''This one is different. This one is driven from the product side, not the crude side. This one is driven by refining capacity, pipeline capacity, product specifications, and product returns,'' Chellgren said.

Three factors converged to put America in an energy squeeze that shows no signs of letting up:

Outdated delivery systems : Throughout the 1990s, historically low crude oil prices meant meager returns for producers.

With little profit flowing into their coffers, companies virtually stopped investing in new pipelines, tankers and upgrades to their refineries. After 10 years of inaction coupled with rising demand, the system is bottlenecked.

''Economics 101 says you make investment in things that have high returns. You pull money out of things that have low returns,'' Chellgren said.

''The entire U.S. refining/marketing industry for a full decade earned less than a 6 percent return on capital employed. And that was in an era when the stock market was earning a double-digit return on capital employed,'' he said.

Refineries are working at 96 percent capacity. A new refinery hasn't been built since 1978, though many have been expanded or renovated.

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http://www.cincypost.com/news/chell093000.html

-- Martin Thompson (mthom1927@aol.com), September 30, 2000

Answers

Still having trouble posting long articles. This is what happens with long articles. So I guess your have to read The rest of story at the web page.

Ouch!! Here was the bad news from the database:

-- Martin Thompson (mthom1927@aol.com), September 30, 2000.


Watch the price action in heating oil, unleaded gasoline, and diesel futures, and in natural gas (including call option contracts). These will give you a much better idea of what's going on in energy than watching the daily movement of the crude oil price.

With natural gas alone now closing in on a 200% price rise over the last year, this alone should be enough to scare the pants off you.

-- JackW (jpayne@webtv.net), September 30, 2000.


Thank you for the heads up. Gon'na start our own reserve.

-- Ruth Angell (bar@bpsinet.com), September 30, 2000.

I thought this was an excellent analytical news item, the kind of which can only be found in this forum; this is why I am such a devoted reader.

-- Nancy7 (nancy7@hotmail.com), September 30, 2000.

The point that jumped out at me is that this is a different kind of energy crisis -- the kind of which, as has been often stated on these boards, has primarily to do with processing and distribution, rather than with supply itself.

-- RogerT (rogerT@c-zone.net), September 30, 2000.


This will fast become a wartime crisis again if the Iraqis start shooting at the Kuwaitis over the border oil dispute.

-- Buck (bigbuck@trailways.net), September 30, 2000.

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