Soaring Oil Prices Fuel Further Refineries
Exxon Mobil Corp, the world's biggest oil refiner, and rivals such as Saudi Aramco and Total SA plan at least US$11 billion of refinery additions as worldwide demand pushes gasoline prices to a record.
The projects include a US$4.3 billion refinery and chemical plant on Saudi Arabia's Red Sea coast by Saudi Aramco and Sumitomo Chemical Co Exxon Mobil, Aramco and China Petroleum & Chemical Corp, China's largest refiner, are spending US$3.5 billion to triple the size of an oil refinery and build a chemical plant in Fujian Province.
The expansion, following two decades of reduced spending because of low prices that cut profits, reflects surging demand that is raising the cost of gasoline, diesel, jet fuel and heating oil.
Gasoline futures, which are based on wholesale prices, rose 3.8 per cent last week to US$1.5755 a gallon in New York, the highest since they began trading in 1984.
Refining "was for so long a poor business," said Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University in Dallas who was an engineer at Marathon Oil Corp for 28 years. "There's a dire need for expansion," he said in an interview last week.
Fuel prices have increased more than the cost of crude oil from which they are derived, making oil company refinery profits grow faster profits from producing and selling oil and gas, even as crude prices touched a record US$57.60 last week in New York.
The average US retail gasoline price reached an all-time high of US$2.061 a gallon on March 18, up 16 cents in a month, according to AAA, the former American Automobile Association, in Heathrow, Florida.
(CRI Mar. 2005)