Citing “unfavorable refinery economics and the outlook for continued unfavorable refinery economics,” Valero Energy Corp. said it will halt crude runs at month’s end of its 235,000 b/d facility in Aruba.Hmm. Refiners losing money? How could that be?
Valero’s move follows by 2 months the announcement by Hovensa LLC, a joint venture of Hess Corp. and Petroleos de Venezuela SA, of closure of the 350,000 b/d refinery at St. Croix, VI (OGJ Online, Jan. 18, 2012). Hovensa will operate the facility, capacity of which had been reduced from 500,000 b/d, as a terminal.
Valero said it has been operating the refinery at reduced rates and at a financial loss. While holding open the possibility of a restart, it said it is considering converting the refinery to a terminal.
Investors Business Daily hammers President Obama for his fake "I bring you more oil" nonsense in its editorial "Obama's Keystone XL Visit A Potemkin Village Photo-Op":
The president stages a photo-op in Oklahoma to take credit for the portion of the Keystone XL pipeline that doesn't need his approval and for oil production on private and state lands beyond his jurisdiction.Of the things within his power, on the other hand, he seems to not quite grasp some concepts - like the cost structure of the oil and gas industry. Here's the president speaking to employees of a federally subsidized solar energy company, complaining about the "subsidies" "given" to those nasty "old" oil companies:
And, yes, that means we make investments in stuff that is new, and we stop subsidizing stuff that’s old. The current members of the Flat Earth Society in Congress -- (laughter) -- they would rather see us continue to provide $4 billion -- $4 billion -- in tax subsidies, tax giveaways, to the oil companies -- $4 billion to an industry that is making record profits. Every time you fill up the pump, they're making money. They are doing just fine. They're not having any problems.
And yet, on top of what we're paying at the pump, we're also going to give them $4 billion in subsidies that could be going into making sure there were investments in clean energy for the future? That doesn’t make any sense. Does that make any sense?
THE PRESIDENT: All right, I just wanted to make sure. Because I didn’t think it was a wise use of your tax dollars. (Laughter.)
We have subsidized oil companies for a century. We want to encourage production of oil and gas, and make sure that wherever we've got American resources, we are tapping into them. But they don’t need an additional incentive when gas is $3.75 a gallon, when oil is $1.20 a barrel, $1.25 a barrel. They don’t need additional incentives. They are doing fine.
AUDIENCE MEMBER: It is our retirement!
THE PRESIDENT: Yes. A century of subsidies to oil companies is long enough. It's time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double down on investments in an energy industry that has never been more promising. (Applause.) That’s what we need to do.
So Congress needs to pass more tax credits for projects like this one; needs to provide certainty when it comes to these tax credits. We need to go out there and do what a lot of states are doing right now, which is saying, let's get a certain percentage of our energy from clean energy sources. Because when we do that, that gives a company like this one certainty that they're going to have customers, and they can invest more and build more. (Applause.)
First, as has been pointed out elsewhere, oil does not cost oil companies "$1.20 a barrel, $1.25 a barrel" or even that per gallon. Maybe he meant $120 a barrel?
Oil costs, according to the Crude Oil Price gauge over there on the right - $104 a barrel. A barrel is 42 gallons of crude, unrefined oil. So, a gallon of unrefined crude, before the costs of transport, refining, drilling, storage, administrative overhead costs $104/42= $2.28/gal. Thus, a barrel of oil costs about 86 times what the president says it does and even if he meant gallons, he got it wrong by nearly 1/2.Now, if he meant $120 a barrel, what does that mean? It means that oil companies are paying a higher price for the product that they use to produce gasoline. Yes, those higher costs get passed on to consumers. That price of crude makes up about 76% of the price of gasoline at the pump (see below) - it is not profit to the "oil companies."
Not all of a barrel of oil can be converted to gasoline. Of any given barrel, according to the Texas Oil and Gas Association, only about 19.5 gallons of gasoline are derived from an average barrel of crude. That's less than 1/2 of the barrel, but let's say we could actually by that 1/2 barrel for 1/2 the price of a whole barrel - it would cost $52 for 19.5 gallons or $2.67 per gallon (at $120 barrel it would be $3 per gallon). According to the U.S. Energy information agency, 76% of the price of gas at the pump is attributable to the cost of crude (see here), 11% to distribution, marketing and refining and - 12% to taxes. Your local taxes may vary. Here in North Carolina, it's about $.35 gallon. According to this site, Exxon (for example) makes about $.02 per gallon profit, or about 1/15 of what the state takes in. Total taxes - well, the American Petroleum Institute has a nice map:
Now, what sort of subsidies does the solar company - the employees of which the president was addressing - get? According to the Las Vegas Sun, the plant got $12 million from the State of Nevada in incentives and (the side comments are the Sun's, not mine):
The federal government gave Sempra Generation about $42 million in tax credits, 30 percent of the price tag for Copper Mountain. The Economic Development Commission said the 48-megawatt project cost $141 million.Copper Canyon provides electricity to 14,000 homes. With $54 million in incentives, tax credits, etc, that works out to over $3800 per house.
State officials provided sales tax abatements for equipment purchases and a 55 percent property tax reduction for 20 years. Those incentives amounted to $12 million. The state gave Sempra an additional $2 million in concessions for El Dorado, an adjacent 10-megawatt solar array.
“Even with the abatements, the state is still netting $27 million over the life of the project,” Sempra spokesman Scott Crider said. “This money would not be available to the state if not for the solar project.”
The cash comes from property and sales taxes Sempra pays at a reduced rate.
Similar incentives are offered to any renewable energy company that commits to a project that generates more than 10 megawatts of energy, enough to power several thousand homes. Firms also must abide by certain hiring and spending requirements to receive tax breaks.
“If they didn’t have the federal or state incentives, they probably couldn’t make these projects work,” Boulder City Mayor Roger Tobler said. (emphasis added)
The benefits to Nevada? Las Vegas Sun:
Temporary construction jobs created: 350. Not bad.So, Nevada offers up $12,000,000 for 5 permanent jobs and 262 temp jobs (now ended)? Wow, talk about a lousy return on investment. Especially since the 14,000 homes being "electrified" are in California. It's really nice that Nevada decided to subsidize California's energy needs.
Nevadans employed: 262. That’s a good share.
Solar power coming to Nevada: 0. Zip.
Parts manufactured in Nevada: 0. Zilch.
Permanent jobs created: 5.
Oh, and as to Sempra, the owner/operator of Copper Canyon:
Sempra Generation is a subsidiary of Sempra Energy, which owns two Southern California utilities, natural gas pipelines and storage facilities in North and South America and wind farms in Indiana and Mexico. In 2010, it reported $9 billion in revenue.Of course, the $9 billion number is misleading because revenue is not profit - but rather income before accounting for expenses. In its 2010 report, Sempra reports earnings of $739 million. For 2011, Sempra reports earnings of $1.4 billion and raised its dividend by 25%.
There is nothing wrong with this. It is the way we do business in this country.
Sempra provides gas and electric service to much of southern California through natural gas powered and one nuclear powered plant. In contrast to the output of its two solar facilities in Nevada, providing power to a total of 17,000 people, its nearby by gas powered electrical generating plant provides power to 350,000 homes.
According to its 2010 annual report, Sempra reports the following "subsidies (according to the Obama adminstration these are exactly the same sort of "subsidies" complained of that the "oil companies" took). From Sempra's 2010 Annual Report:
So, it what sort of world would the president be making sense? Well,I guess in a world in which the price of every gallon of gasoline sold was over 2/3 profit to the oil companies and in which there were no costs except for the price of crude oil and there were not federal or state taxes in the price of gasoline at the pump.
In this world, though, the president is "talking through his hat."
Too bad so many people will fall for it.
Look, here's a look at Exxon's 2010 consolidated statement of operations to compare with Sempra's: