Thursday, January 19, 2012

I got your gas crisis right here...

So last month, amidst little fanfare, Sun oil company closed their two northeast oil refineries. This is bad. Both refineries haven't been modernized in the past 20 years. Sun's current CEO, who is more interested in selling candy bars and slurpees at the retail level than making oil, has orchestrated sun's abandonment of these billion-dollar refineries. I say abandonment because Sun never reinvested in them, so while they're technically for sale, no one is going to buy them, as they will not return the profit of a well-maintained facility. Sun Oil is the funder of the Pew Trusts, politically-motivated clearinghouses for radical causes in 'social justice' whatever the fuck that means (socialism), and environmentalism. Sun is a very lucrative backer of green, Inc. But in the meanwhile, we now have limited capability of refining finished products (read: fuels) in the northeast.
To put the corn in this punchbowl turd, Hess oil is closing their St. Croix refinery as well, co-owned with PVDSA, the Venezuelan governmental oil company (the folks that do business as CITGO in the US. This represents something interesting here. Being located safely out of arms' reach of Hugo Chavez' nasty habit of stealing other people's oil-finding and -making equipment (this being cheaper than maintaining their own, thus saving PVDSA from maintenance costs) in Venezuela, taking a page out of PEMEX (Mexico's national oil company, who is doing miracles keeping their refineries sort of open using bailing wire, bubble gum and slave labor to save on costs)'s book.
Without fear of PVDSA pulling a smash and grab, such as the BS pulled by Venezuela last year on Chevron and Tidewater (both being American companies) and BP (Being British, and therefore somewhat used to appeasement at any cost, this being their way of survival in places like the Middle East where they lack access to shock troops like TOTAL (France) has with the Foreign Legion to keep the mongs in line. At any rate, Hess St. Criox is heading for mothballs.

St Croix is a great stopping-over point for foreign ships to transfer oil from VLCC's (Very Large Crude Carriers (which are far too big to get anywhere near the US except for a few mooring stations in the Gulf of Mexico) to Suexmax and AFRAmax (smaller, but still goddamned big tankers for delivery to North America. Since HOVENSA (the St. Criox refinery) and even the shuttered Sun refineries in Philly and Marcus Hook NJ will be used as tank farms, there will still be companies lining up to store their oil and release it at strategic sales times at the former refineries. There won't be any return trips carrying refined or semi-refined oil back to points East for the VLCC's, however, as was the custom before, which means more big-ass ships deadheading from Disport to Loadport in the far east. This is bad for shipping, of course, as oil transshipment is already fairly unprofitable these days.

One final thought: this is very reasonable proof that the people making the money off of oil aren't the people making the Oil. Exxon Mobil might be making massive bank, but they're doing so on margins that are an order of magnitude less than the speculators and money machines who are driving prices. I've said to friends (carefully, and looking carefully at anyone who might be in earshot) on several occasions that the oil companies aren't the robber barons here; you want to see who is making $10 for every $1 the oil majors are making, look at your retirement fund manager to start with.


Anonymous said...

I guess humping hoses in NY harbor gives a person special insight into the international oil markets

Paul, Dammit! said...

Nothing special about it, smartass. A subscription to FAIRPLAY and knowing the trade routes for oil shipping is enough for anyone to figure out the same.

I'm going to assume you're not trying to be smarmy, but if you're deeply concerned that I might know how to do something besides oil transfers, almost no one comes into the marine trades as a first career. My own first career as a scientist included a fair amount of writing about resource economics. Few people are lucky enough to figure out that they're in the wrong business after college and have the leeway to radically retrain. A little hose humping is a small price to pay for doing what I do, but resource economics is resource economics, whether animal, vegetable or mineral.

Anonymous said...

Damn, I've been posting as anonymous since I started reading your site. Guess I'll have to make my comments under a slightly different pseudonym.

Besides, you don't need a degree in international finance or economics to have an understanding of the markets. Anyone with interest who is paying attention and reading up on the subject can do it. I have degrees out the wazoo (including a PhD in international affairs). I gain a lot of insight discussing issues with a good friend who is a community college drop-out.

I don't always agree with your political analysis Paul, but you do offer a thought out perspective. I'd because if the other anonymous would have taken your post differently if you were wearing the marine biologists hat instead of the deck hand's out.

A different anonymous.

Paul, Dammit! said...

The first nail in the coffin of my professional career was hammered in while I was starting the groundwork for my master's thesis. I spent 6 months in Europe doing the legwork to develop a model that would predict how market globalization would effect labor opportunties and the support industries in the extraction of natural resources. By the time I figured out the statistical array that I could use to support my model, I realized how much I hated statistics. When I was done with the European portion of the study, I hated how much efficiency in supply consolidation was driving environmental regulations, and not the other way around. The American portion of that study was so disheartening that it made publication and lecturing on the matter a chore.

Ebb Tide said...

Guy who wants to hide behind the title Anonymous and come out with a one sentence snarky comment doesn't really deserve a reply.

You're not afraid to put your thoughts & opinions on the line in eloquent posts. And by the way I enjoy the Brazilian cultural photo's along the way.

Mister Anonymous should grow a pair!

Anonymous said...

Apologies to anonymous whose ID I usurped. My problem with the original post was the inference that Sun's decisions on closing refineries has something to do with their political agenda. Wingnut thinking.

I spent 25 years going to sea (and, thank god, hung it up 10 years ago), have a graduate science degree, and have enjoyed reading Pauls blog for about 6 or 8 years now.

From now on I'm posting as Ebb Tide.

Paul, Dammit! said...

I mentioned the Pew Charitable trusts to show that Sun has branched out into other profitable ventures beyond oil, despite the incredibly favorable tax status that owning those refineries gave them- by not reinvesting in facilities whose construction and operating costs were partially offset by a series of tax subsidies, Sun was able to bank more money for 20 years, and will continue to do so as the tank farm continues to operate as a storage facility. In the meanwhile, the tax breaks will continue with Sun's new focus on retail sales, as the Pew Charitable trusts will enable them to spend a little and save a lot- having a 501(c) corporate sub-entity in their arsenal is smart tax policy, and their continued ability to set public environmental policy ensures that Sun will continue to have a license to print money via Slim Jim sales and the usual gauntlet of Green Inc. for-profit environmentalism and other politically-motivated profiteering.

Rather than dither, I'll come out and say it, and you can call me a wingnut: Sun's management is smart; they no longer need refineries to maintain a favorable tax status. They have a massive vampire organization that enables them to manage their own political status, funded by monies that would otherwise be lost to taxes anyways. As I said, smart. Imagine if we could all direct EXACTLY how every penny of our taxes was spent on our own projects, things that were important to us, rather than just paying the IRS.

HT said...

Hate to hear Hess St. Criox is shutting down. I ran there and to San Juan (Power House)some time ago for about a year,one of the beat facility's around.