Rob Zenilman submits: In today's Wall Street Journal, Steve Levine and Patrick Barta's Giant New Oil Refinery in India Shows Forces Roiling Industrydiscusses the latest refinery being built to satisfy the U.S.'s thirst for gasoline, only this refinery is being built 9,000 miles away in India. Billionaire Mukesh Ambani is spending $6 billion to build the world's largest refinery. An estimated 40% of the fuel it refines will be shipped to the United States.
Aside from importing crude oil, the U.S. is becoming increasingly reliant on imported gasoline - from 8% in 2000, to 11% in 2005, to 13% for the current year. Refiners earn at least $20 for every barrel of crude they refine. In the second quarter, Exxon Mobil's (NYSE:XOM) refining division earned $1.3 billion (up 11% from last year), and independent refiner Valero (NYSE:VLO) earned $1.9 billion for the quarter (uo 124% - partly due to a recent acquisition). Lower costruction costs, lower labor costs and less environmental "red tape" make the project feasible, even when accounting for the 9,000 mile trek to the U.S.
Comment: There has not been a refinery built in the U.S. since 1976, given environmental regulations, NIMBY ("not in my back yard"), and construction costs - it is significantly cheaper to purchase a "used" refinery. When hurricane Katrina hit last year, the U.S. lost 20% of it's refinery capacity in one day - gasoline prices subsequently jumped $0.45/gallon. President Bush has even recommended building refineries on closed military bases. See: List of U.S. oil refineries