You are here
WASHINGTON -- With demand for gasoline high and profits pouring in at a record clip, one would expect oil companies to be falling over each other to build new refineries, yet there hasn't been a new refinery built in the United States in 28 years and more than 200 smaller facilities have closed, reported the Associated Press.
Refining never has been viewed as a cash cow by the petroleum industry, which complains about meager profit margins, hefty environmental costs and too much government regulation.
But with gasoline prices hovering at $2 per gallon for much of this year, the country's largest oil companies and independent refiners are expected to report soaring profits from refinery operations in second quarter earnings this week.
An early hint of the industry's healthy bottom line came last week from Sunoco Inc., which reported a $217 million profit from refining related business, quadruple the total from a year ago. It produced a record 43 million barrels of gasoline during the quarter.
The refineries set production records during the first half of the year, including 8.6 million barrels of gasoline a day, but still couldn't keep up with demand, the American Petroleum Institute reported Tuesday.
Still, no major oil or refining company appears eager to add a new refinery. Instead, more could close. A refinery in California is expected to shut its gates this fall. Two Texas refineries have been on the market for three years with no takers, and an offer by Saudi Arabia to help build several U.S. refineries brought not even a hint of interest on Wall Street. A new refinery project in Arizona has yet to break ground after five years of trying.
"Today investors are in no mood for refinery building even if funding were available," Arjun Murti, managing director of Goldman Sachs Co., told a recent congressional hearing on the dearth of U.S. refining capacity. Any executive who might pursue a new $3 billion refinery risks his company's stocks taking a hit, said Murti.