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Gulf Coast May Suffer the Most in Refining Shakeout

Houston Chronicle. The US Gulf Coast could suffer the most in a shakeout of the refining business that some analysts and industry executives view as an inevitable outcome in coming years given rising costs and weaker demand for petroleum fuels.

The region is especially vulnerable not only because it has more plants than other areas and competition is more intense, but because a reduction in refining anywhere would hurt oil and gas companies that support jobs and economic growth in this part of the country.

Yet permanently closing oil refineries may be unavoidable if the industry is to remain profitable in the long term and adjust to what is likely to be a smaller US market for petroleum fuels over time, analysts said.

A recent study by industry consultancy Purvin & Getz predicted roughly 1.1 million barrels of US refining capacity—about 6%—will be forced to close within the next two years amid declining demand for petroleum fuels and surplus capacity at plants. The report projects nearly half of the closures will be on the Gulf Coast. A Deloitte forecast in July predicted that 2 million barrels (more than 10%) of US capacity could be eliminated in the next several years.

Furthermore, new refineries opening around the world could force weaker plants out of the business and send cheaper fuel to the US, undercutting domestic refiners.

Currently, the US has about 150 oil refineries with a total operating capacity of roughly 17.6 million barrels per day. More than 40% of that capacity is located in Texas and Louisiana, and about half of that amount is within the Greater Houston area.



Our city has already gone down from four to two large refinneries and soon to drop to one, by end of 2010. Nobody (with the exception of the employees)is complaining.

Smaller, more efficient cars will be followed by electrified units. The days of zero local crude oil refinneries will come. We will all be better off.

Roger Pham

Any potential loss of jobs is regrettable, and the more the reason for the government and the private sector (Big Oil?) to accelerate the investment toward GREEN job creation. If renewable energy is cost-competitive with fossil energy, very good. If not, the extra money spent will create more jobs. It'll be a win-win situation.

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