Interesting discussion but some points are off the mark. No new refineries have been built since 1079. Capacity in refineries has had to be reconfigured almost yearly to account for Federal and State environmental requirements as to what can be in your gasoline(there are currently 14 different gasoline formula requirements). This results in some refining capacity being underutilized in some parts of the country when demand is not there. The republicans have introduced a bill to provide incentives to build new refineries but there is some question whether oil producers can supply more oil to be refined. As for natural gas, LNG could be a major factor in increasing supply as domestic production is in decline. Opening new areas for exploration must be done or prices are only going to go higher without more supply or a very healthy cut in demand. Also all oil companies contract for supply on a long term basis with the price generally tied to a market price, so when the price goes up on the market the contract price also goes up. Same pricing mechanism all the way to the retail outlet. The only protection for large swings in prices are financial hedges, which is what Southwest has used to stay profitable. Just some ramblings on a complicated issue.
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10-27-2005, 05:17 PM
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