May6, 2012:

Delta Airlines recently made headlines by announcing it was buying an oil refinery in Pennsylvania, which will reportedly save the airline $300 million a year on fuel purchase. But one financial expert wonders what the negatives are.   John Berlau, senior fellow for finance and access to capital for the Competitive Enterprise Institute's (CEI) Center for Economic Freedom, says this is not the first time a non-oil business has bought a refinery.

"There have been some farm co-ops [and] private equity firms, but this is a new trend that's being driven both by high oil prices and also new regulations forcing businesses to come up with strategies to handle rising oil costs," he explains. According to Berlau, those problematic regulations prevent the exploration for more oil. Also, many lawmakers and policy experts argue that the Dodd-Frank Wall Street Reform and Consumer Protection Act amounts to overregulation.

"Dodd-Frank prevents manufacturers, airlines [and] others from buying derivatives to hedge oil prices so they don't have to pass on the higher price to the consumers," Berlau details. Regardless, he notes that this is only a refinery, not an oil well, which means "if oil keeps going up, if you keep preventing drilling in American lands, it's going to be of limited assistance."

On a related note, Michael Giberson, assistant professor of practice with the Texas Tech University Rawls College of Business' Center for Energy Commerce, has a few questions -- such as: Is it really going to be cheaper for Delta to own a refinery and make its own jet fuel than to purchase it in a reasonably competitive market? Also, why does Delta think it can do a better job of running the refinery than its previous owner, ConocoPhillips?.

By OneNewsNow