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Thread: More Information on Shell Refinery in Bakersfield

  1. #1
    Essex502
    Refinery Expert Is at Odds With Shell
    A state-hired consultant finds that a Bakersfield site the company plans to shut down still is 'economically feasible.'
    By Elizabeth Douglass, Times Staff Writer
    Shell Oil Co.'s Bakersfield refinery is financially sound and an attractive asset for potential buyers, and the company's decision to close it "flies in the face of common sense," a consultant hired by the state said Friday.
    Industry expert Malcolm Turner, retained by Atty. Gen. Bill Lockyer to provide an objective opinion on the refinery's outlook, said his consulting firm disagreed with Shell's reasons for planning to shut down the facility Oct. 1.
    The proposed closure of the refinery has generated outrage among politicians and consumers, who have endured gasoline prices that have hovered above $2 a gallon for more than four months.
    California's fuel supply and demand are so delicately balanced that any reduction in refining capacity could cause prices to rise further. Shell's plan is being scrutinized by, among others, the Federal Trade Commission, which is investigating whether shuttering the refinery would violate antitrust laws.
    Turner, in an interview, said other companies were interested in buying the facility and "would be successful operating it as an independent refinery." Turner, who has worked for Shell in the past, is also helping to identify buyers for the refinery but declined to identify potential purchasers.
    "We do conclude, unlike Shell, that the Bakersfield refinery is commercially and economically feasible," Turner said.
    Turner stressed that his conclusions were preliminary. But he said they were unlikely to change before his firm, Houston-based Turner, Mason & Co., submitted its report to the state at the end of July.
    Shell spokesman Stan Mays said the company hadn't heard about Turner's findings. But he said, "We continue to stand by our conclusion that the small, inefficient, landlocked Bakersfield refinery can no longer compete and is economically unviable going forward."
    The company has said it will consider any credible offers for the refinery.
    The consultant's opinion is not binding on Shell. Still, it is encouraging news for a bevy of government officials and consumer advocates who have been openly skeptical of Shell's assertions that the facility can't be run profitably and lacks an adequate supply of crude oil.
    Lockyer spokesman Tom Dresslar said the attorney general would comment on Turner's report when it was completed. He said Lockyer "remains hopeful that a way can be found to keep open this crucial source of gasoline … so that consumers are spared the inevitable higher prices that a closure will bring."
    Market experts consistently cite California refineries' inability to keep up with demand as a key factor in the state's chronically lofty fuel prices, which on Monday averaged $2.186 for a gallon of self-serve regular gasoline, according to the latest Energy Department survey.
    Shell's Bakersfield facility is relatively small, producing 2% of the state's gasoline supply and about 6% of its diesel fuel. But there is little doubt that its dismantling would further squeeze supplies and inflate pump prices for motorists.
    Critics believe that Shell wants to close its Bakersfield plant to boost profits at its two other California refineries, based in Wilmington and Martinez in the Bay Area.
    Shell announced its decision to close the refinery in November and, in the intervening months, has put forth a variety of explanations.
    Initially, Shell said there was not enough San Joaquin Valley heavy crude to keep the Bakersfield refinery running. After state officials countered that nearby oil fields remain productive, the company said that Shell's existing oil contracts could no longer feed both the Bakersfield and Martinez refineries, and that Shell would rather use the remaining crude at its Martinez site. (Changing their story here)
    Shell's rationale has been questioned by experts who point out that the oil company could easily import crude oil for its Martinez plant, which is close to the coastline and already uses some imported blends.
    The company's stance was also undermined by a surge in California fuel prices, which made the nation's most lucrative fuel market even more so this year.
    Internal documents show that Shell's Bakersfield refinery earned almost $25 million in the first five months of 2004, compared with a profit of about $5 million for all of 2003. Profit at Martinez exceeded $91 million from January to May, more than double company projections.
    Said Turner, "We've heard their point of view, and they've given us the information they based their decision on … and the information, the arguments and the reasons they used are not persuasive."
    Turner's opinion could be hard for Shell to dismiss, given that his firm has decades of experience appraising refineries on behalf of oil companies, including the U.S. division of Royal Dutch/Shell Group. For its part, Shell continues to provide information to several interested bidders, spokesman Mays said.
    "We're open to the possibility of a sale, and, barring that, we continue to plan for a safe and orderly closure," he said.
    Reprinted without permission of the Los Angeles Times

  2. #2
    Dr. Eagle
    Normally I am a champion of free enterprise, but this smells funny... Kinda like I imagine hoolagin smelled last night..

  3. #3
    welk2party
    Last I checked the refinery was owned by the shareholders. They can do whatever they deem is economically feasible. Does this smell like higher gas prices? Yes!

  4. #4
    Racer277
    Shell doesn't have to close a refinery to raise prices, they merely have to raise prices. There is not so much competition that they have to worry about being undersold.
    What I think everyone is missing may be the fact that Shell's refinery is probably as polluted as every other refinery around here (and the rest of Cali). Selling to another private company is probably out of the question, as they wouldn't want to take on the liability. However, if the govt want to force Shell to keep it open, maybe they (the govt) will then become responsible for the pollution that's been in the ground for the last 40 years. I've seen stranger things happen.
    I have not seen the oil companies make mistakes or miscalculate. I have worked on these sites, everything is state of the art and makes govt facilities (even the highest tech ones) look like a joke. Whatever is behind Shell's decision, they have a plan and a reason.

  5. #5
    Essex502
    Shell's plan - higher prices. Pretty simple.

  6. #6
    MagicMtnDan
    We should trust Shell and their decision-making capabilities, right? They surely have our best interests in mind, right? They couldn't be closing the refinery to save money and/or make more money could they? They would never close the refinery to reduce supply and drive up demand and prices would they? They don't have any pressure to continue increasing their profits and decreasing their costs every quarter do they? We can trust them to do what's best for their customers right?

  7. #7
    Racer277
    Sorry if I wasn't clear.
    I am not defending Shell. These oil companies make ungodly profits AFTER spending ungodly amounts of money. Sometimes it makes you sick to see these places.
    My point is that as a manufacturer, I don't necessarily have to reduce my ouput to increase my price to my customer. Especially when they are locked in to me and my product. Although it could be that simple, and if it is, they are privately owned, they should be able to do that. Anti-trust/trade laws not withstanding.
    However there may be more to it than that. The Oil companies in some cases are paying billions in cleanups. Health lawsuits are just around the corner for them, maybe they are being proactive here. And again, I am sure it is not the consumer they are protecting.
    I don't see gas prices ever coming down significantly, and that sucks!

  8. #8
    Tom Brown
    Originally posted by Dr. Eagle
    Normally I am a champion of free enterprise, but this smells funny... Kinda like I imagine hoolagin smelled last night..
    ... but not as bad as he smells today.

  9. #9
    Havasu Hangin'
    Originally posted by welk2party
    Last I checked the refinery was owned by the shareholders. They can do whatever they deem is economically feasible. Does this smell like higher gas prices? Yes!
    Sorry...but the Federal Trade Commission's job is to prevent and/or break up monopolies (which is not free-trade).
    "Economically feasible" has nothing to do with it, if they can control market through restriction of free-trade.
    The FTC has been asleep at the switch on oil companies market share and price control.

  10. #10
    Racer277
    Originally posted by Havasu Hangin'
    Sorry...but the Federal Trade Commission's job is to prevent and/or break up monopolies (which is not free-trade).
    "Economically feasible" has nothing to do with it, if they can control market through restriction of free-trade.
    The FTC has been asleep at the switch on oil companies market share and price control.
    Yes, this is the key. They are in the position of a monopoly, they need to be controlled by the FTC. However, if the FTC deems they need to keep this refinery open, do we (as taxpayers) somehow take on the cleanup burden?
    I've worked with Telcos (heavily controlled by the FTC) and you might be amazed at the crap they get away with because some ruling was made to protect the consumer from something completely different. Sometimes our govt reps are remarkably short sighted when they make determinations of this type. I have noticed the oil companies are starting to change names nearly as often as the telcos-strange?
    Joe shmo gas station owner is not making a killing from these prices. The oil companies are.

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