Sunday, July 22, 2007

Record Failures at Oil Refineries

Record Failures at Oil Refineries Raise Gas Prices - New York Times:
"These mechanical breakdowns, which one analyst likened to an “invisible hurricane,” have created a bottleneck in domestic energy supplies, helping to push up gasoline prices 50 cents this year to well above $3 a gallon. A third of the country’s 150 refineries have reported disruptions to their operations since the beginning of the year, a record according to analysts.

There have been blazes at refineries in Louisiana, Texas, Indiana and California, some of them caused by lightning strikes. Plants have suffered power losses that disrupted operations; a midsize refinery in Kansas was flooded by torrential rains last month.

American refiners are running roughly 5 percent below their normal levels at this time of the year.

“You have a system that is taxed to the limit,” said Adam Robinson, an energy research analyst at Lehman Brothers. “This is what happens when spare capacity is eroded.”"
This is only half of the problem. The other half is that refining was such a low margin and unprofitable business during the late 80's until about 2001 that the money just was not there to provide the preventative and predictive maintenance necessary to protect aging assets. Believe it or not, cutting preventative maintenance may temporarily cut costs, but raises the long-term costs of operation and eventually causes reliability issues. It is like killing the golden goose or reaping what one sows. The NYTimes did not care about refinery margins or low industry profit margins then and demonizes the industry now for reliability issues. The two go hand in hand!

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