The cost of building a new refinery in the US will be tremendous today. The dollar is weak, and regulations make it near impossible to build a new refinery. The price of oil will probably have to stay at or above $100/bbl to even begine to think the project is viable. Also, you’re looking at eight to ten years to build a new refinery, lay infrastructure and pipelines, and integrate a new oilfield. Actual drilling time is short. We could have the initial field area drilled, logged, and in production capacity in a year. But seeing the reslts of that will take sometime longer.

What I don’t see is a better alternative than getting beat up at the gas pump. Ethanol is already driving up the price of corn, which will drive up the price of food in general. Also, ethanol has it’s logistics and environmental difficulties. Fuel cells create an infrastructure nighmare with the hydrogen it uses for fuel. (Think a Heindengerg on every corner). And unless we nuke the industrial centers of China and India, consumption of oil will continue to rise. Now what most people don’t know is that production is starting to outpace demand. Even if you don’t see it in the markets. The closest we came to outpacing production was three or four years ago, and the markets and producers kept real quiet about it. The gap has been steadily increaseing since then. Nothing like we had in the early eighties, but there is a gap. Our current price hype has been caused by speculators, brokers and hedgefunds. Also one of the biggest reasons is the dollar being so weak. The world commodity markets trade in dollars, so if a $1.50 makes a euro (it’s actually much worse at the moment) then EU countries are buying oil at half our price. So they buy up futures and stockpile it to sell back what they don’t need at a higher price. But now it’s cheap enough that they can ramp up their own chemical, plastics, and agriculture (oil is s major ingredient in commercial fertilizer) industries. So now we can’t compete in price in the world economy with our manufactured goods and food. So we lose money all around. No industry, no jobs. No jobs, more welfare. More welfare, more taxes. More taxes, less profit. Less profit, no industry. And on and on and on… (got all that?)

So a new oilfield and refinery is great, as lomg as we don’t sell it off to the rest of the world to make a quick buck. If Washington gives industry a good reason to stay in the US we might make a turn around. A little personal responsability from our citizens would help speed up the process.

I case your wondering where all of this came from, I’m sitting at my desk eating lunch… at one of the worlds largest oilfield service companies in Houston, Tx.