Student Drop-Out Rates...why?

"TaxSrv" wrote in message
...
No, it doesn't make much sense. The cost of enviornmental regulations
are
already in their costs and refining margins are high (including the
costs of
compliance). Most refiners are looking to add capacity over the next
few
years although with expansions not "new" refineries. The idea that
nobody is
motivated to make the first move because there are few players is
silly.
Capital investment decisions are made based on the projected return.

Mike
MU-2

There are considerable environmental regulation costs in building new
refineries, though.

True, but as with all costs there is a price point where you go ahead
anyway.

As to the effect of a few players, I'm only
parroting what industry analysts say about the situation. Soon it may
not be the case, but if current refining capacity can meet demand,
where's the return on investment now?

If current refining margins are high and refineries are running at 100% of
availible capacity and the market is projected to keep growing (all true)
then you need to begin the process of adding capacity today or your market
share will shrink as your competitors add capacity.


The following research by the Consumer Federation in 2003 appears to
adequately explain the odd situation in this industry:
www.consumerfed.org/pdfs/gasoline1003.pdf


The problem with this analysis is that it assumes that recent historic or
low pricing is the "right" price instead of being an aboration. There are
risks in expanding refining capacity. Record steel prices are one (you
might end up with the most expensive refinery). The record price of crude
is another (at some point gasoline sales could shrink as people buy less
becasue of the high price). Time is a risk (you have to decide now, but
don't know what the market will be like when your new capacity comes online.

Free markets are not prefect, they are just better than any other way of
allocating resouces yet devised. They do have a tendency of moving too far
one way and then too far the other. Oil company execs are driven by fear
and greed like everyone else. They want to have capacity when there is a
shortage of capacity but they are also afraid of adding capacity right
before demand collapses.

We, as a country, were pretty stupid not to see the crude spike coming (I
saw it and made plenty). One of the first things GWB did when he took
office was to not implement a planned increase in the corporate average fuel
economy standard. Most of the US vehicle fleet has been purchased since
then and all those vehicles could be getting about 10% better mileage, which
in turn, would reduce demand for gasoline which would lower the price. Of
course, The Market is currently changing the allocation of resouces through
pricing but it is going to be a lot more painful.

Mike
MU-2