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Originally posted by sebastian_dangerfield
Our refineries are going full bore, but we only refine 60% of our gas.
ETA: I think ours are still not capable of running at true full capacity, however. A bunch got really screwed up after Katrina.
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The refining issue is a major one, as we've been yammering about the fact that there hasn't been a refinery built in the last 30 or so years, but I think the bigger issue is the price of crude oil. If the raw material costs twice as much to refine, the product is going to reflect that increase in cost.
There' s no real indication as to why the price of oil has skyrocketed over the last few years.
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If consumers are baffled by the rising prices, so are many oil experts. "The fundamentals are no problem," Jeroen van der Veer, chief executive of Royal Dutch Shell, said in a recent interview. "They are the same as they were when oil was selling for $60 a barrel, which is in itself quite a unique phenomenon." He blamed the lack of spare oil production and refining capacity, and tensions in the Middle East, for keeping prices high.
Yesterday, Citigroup became the latest bank to raise its oil price forecasts, upping its estimate of the full-year average for 2008 by 20 percent, to $96 a barrel, and boosting its 2009 estimate by 17 percent, to $88 a barrel. When the U.S. economy is weak, banks generally lower their expectations for oil prices.
"There is no question that the continued strength in oil prices continues to challenge perceptions of what constitutes a 'sustainable' level," Citigroup oil analyst Doug Leggate said in a report. "The oil price outlook arguably remains more subjective than ever and hence leaves any long-term oil price assertion equally subjective and somewhat irrespective of traditional 'fundamental' analysis."
Many oil experts point to big hedge funds, investment managers and pension funds, which are pouring money into commodity markets.
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There are a lot of oil execs in this part of the world who are pretty convinced that the real price of oil is somewhere around $50. Having gone through
one oil bust, I think that the oil companies are being a lot more cautious this time around and assume the price of oil is going to go careening down sooner or later, which is why they're not particularly sympathetic to complaints about their current record profits.
