free html hit counter Peak Oil Debunked: 254. REFINERY BUILDING BOOM IN MIDDLE EAST

Saturday, March 04, 2006

254. REFINERY BUILDING BOOM IN MIDDLE EAST

One of the oldest and most frequently parroted arguments for imminent peak oil is this:
The real reason no new refineries have been built for almost 30 years is simple: any oil company that wants to stay profitable isn't going to invest in new refineries when they know there is going to be less and less oil to refine.Source:LATOC
The fact that oil companies have not been building new refineries recently suggests they are well aware they will need fewer, not more, in future.Source:An idiot who reads LATOC
If there were oil in the future and they knew, they would be building refineries.Source:Another idiot who reads LATOC
Kenneth Deffeyes references this argument amongst all the other superficial tripe in his recent "four horsemen of the apocalypse" interview.
With the oil companies, you have to watch what they do and not what they say. What they're doing is taking in $10 billion and $20 billion a quarter in profits and handing it out as increased dividends, buybacks of their stocks, giving it to their executives. They're not drilling, they're not building new pipelines and not building new refineries. If there were good prospects out there, they'd be out there drilling like crazy.
In the previous entry (#253), we've already discussed why the majors aren't drilling like crazy. They're being shut out from all the best spots by NOCs (National Oil Companies), war and fiscal instability/disincentives. Intellectually dishonest soundbite-peddlers like Deffeyes continue to pretend that the only oil companies in the world are the "majors" (IOCs, International Oil Companies like BP, ExxonMobil etc.) -- conveniently ignoring the key fact that the majors are actually bit players, and the NOCs control 77% of the world's oil resources (click to enlarge):



When we approach this topic honestly, and include NOCs in "oil companies", this peak oiler argument about nobody building refineries turns out to be just more ill-founded hype and deceipt:
New refineries will dramatically increase the Middle East oil exports to US and Europe - FT
New refineries will dramatically increase the Middle East oil exports to US and Europe

Financial Times reports that Europe and the US are expected to become increasingly dependent on the Middle East as an exporter of refined petroleum products over the next 10 years. New FT research shows that refining capacity in the Middle East is to overtake that of Russia and the former Soviet republics, where underinvestment has plagued the energy sector.

Aggressive policies to build big refineries that will boost capacity in the Persian Gulf by 60% will dramatically increase the region’s exports to US and Europe, just as Washington looks to break its dependence on oil from the Persian Gulf.

[...]

The Organisation of the Petroleum Exporting Countries, the cartel that controls 40 per cent of the world’s oil supplies, plans to increase its refining capacity by almost 6m barrels a day, or 50%, in the next seven years.Source: INTERTANKO Feb. 14, 2006
-- by JD

4 Comments:

At Sunday, March 5, 2006 at 2:02:00 AM PST, Blogger Chris Vernon said...

I think you’ve twisted this around a bit. The Peak Oil argument is that globally refineries aren’t being built since there’s no point in building the marginal refining capacity to cope with oil for a few peak years and for it then to lie dormant for the rest of its life.

The fact that OPEC are building refineries doesn’t effect this argument. We could be 20 years before or 20 years after peak and OPEC counties might still choose to build refineries. OPEC currently exports mainly crude oil, not refined products. The refining process is value add (similar to the way supermarkets cut up salad and sell in bags rather than just sell a lettuce). If they can build a refinery and make a profit on the refining process then good on them – there is no relevance to peak oil, their new refining capacity might just displace refining capacity elsewhere in the world.

In fact as their share of oil supply increases OPEC gains more control over the price of crude. If they sell the refinery process as well they can extend monopolistic price control to incorporate refining as well. A refinery in Europe isn’t worth the ground it’s built on without a supply of crude oil – if OPEC have their own refineries they can withhold this crude and sell their own refined products and claim a larger share of the value chain.

 
At Sunday, March 5, 2006 at 8:33:00 AM PST, Blogger nick said...

Excellent point, Chris. This seems somewhat equal to what happened in the early '80's. There were major disruptions and mainly the US was trying to get off of foreign oil (Carter). OPEC didn't want shale and tar sands to make a sizable portion of the energy picture because then they'd lose some hold on the world. Same thing here. If other nations don't really 'want' to build more refineries (by strict laws and rules), then they can speed up that process by getting their own cheap labor to process the oil, thus gaining more power faster.

Again, this just spells more bad news for the West as we lose even more control over our economies and lives. If they get these pushed through over there, then there would be absolutely no incentive (save Congress acting) for them to build new plants when they can get it 'cheaper' (since IOC's won't have to refine or build the refineries) from overseas.

 
At Monday, June 11, 2007 at 12:40:00 PM PDT, Blogger Caseygrl said...

To add to the thing about oil companies not wanting to build more refineriers here in the us, is that they don't want to because of the push for alternative fuels, mainly biofuels. No joke, I saw it recently as a news bit. The big oil companies do not want to build more refineriers cause of the push for biofuels. I about fell out of my chair laughing when i read the article. It doesn't suprise me, though. It seems like they'll use any old excuse, though maybe now they see the light getting dimmer on their reign over us.

 
At Thursday, June 12, 2008 at 10:12:00 PM PDT, Blogger DC lloyd said...

Its sad how americans feel about the increase in the cost of fuels. The day has arrived my friends. will the sheep awake? that is the question and what will the sheep awaken to? I'm counting the days until the job I do{drive a truck} will no longer exist! its around the corner! chaos will engulf the american dream. already the cost of living is increasing on a daily Rise. the little things... Milk, bread, basic needy items are slowly but daily rising! wages are not! crime has increased and will not slow down for nothing..... ITS HERE PEOPLE WAKE UP!!!!!!!! STOCK UP ON FOOD AND AMMO. GET YOR CHILDREN and LOVED ONES TO SAFE GROUND. JOIN PACS OF PEOPLE AND BAND TOGETHER FOR WHAT IS ABOUT TO TAKE PLACE WILL NOT ALLOW THE WEAK TO SURVIVE!

 

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