June 10, 2012: 

Along with barbecues, parades and a day off of work, one of the Memorial Day traditions in the United States is to talk about the price of gas at what is still called the "start of the summer driving season." Readers who don't travel much may be surprised at the extent to which gasoline prices can vary from state to state - a byproduct of not only the number of refineries in a given region, but pipeline access, quality/formulation regulations and taxes. What's true in the United States is also true around the world. Gasoline prices vary remarkably around the globe, with some countries offering subsidized rock-bottom prices and others layering sizable taxes on every liter or gallon.  

The Home Front

Across the United States, there are some sizable discrepancies in gasoline prices. While drivers in some Southern states pay as little as $3 a gallon, prices all along the West Coast exceed $4 a gallon. Not surprisingly, taxes make up a significant part of the difference. While only about 10% of the price of gasoline in Oklahoma goes to local, state and federal taxes, that rate almost doubles in New York. With relatively few exceptions, overlaying a map of the states with the highest taxes on gasoline correlates very closely with those states that have the most expensive gas. Still, taxes don't explain all of it. Gasoline requires refineries to make it, and pipelines, barges and trucks to transport it. Nearly 40% of the country's refining capacity stands in the Gulf region, and that's where a lot of the country's cheapest gasoline can be found. While areas like North Dakota are currently producing a lot of crude oil, there isn't nearly as much refining capacity in the region. Consequently, fuel costs about the same in Fargo, N.D. as it does in Atlanta, Ga. Then there are cases like California. Not only does California have high taxes (69 cents per gallon of the $4.10 to $4.15 per gallon retail price), but there is very limited capacity in the state. What's more, California is very demanding when it comes to quality standards and that imposes still more costs at the pump.

A Similar Story Overseas

At an average pump price of $3.61 for the week ending June 4, U.S. gasoline prices are actually quite low on a global basis. Of the countries in the world with cheaper gasoline, all of them except Bolivia and Ghana are meaningful oil producers. In some cases, as in Indonesia ($3.44) or Mexico, a lack of the right kind of oil and/or adequate refining infrastructure has kept prices near the U.S. average. In other cases, like Iran (42 cents), Saudi Arabia (72 cents) and Kuwait (98 cents), gasoline prices are subsidized as a way of keeping the citizenry relatively content. Government control on refining and retail pricing is relatively common around the world. While most of the OPEC countries have national oil companies that also refine and market gasoline, countries like Brazil and China force corporations like Petrobras and Petrochina to abide by price controls.  On the other side of the spectrum, countries like Turkey ($9.35), Israel ($7.68) and virtually all of Western Europe pay twice as much or more than Americans on a like-for-like basis. Some of this can be tied to the availability of oil. Neither Israel nor Turkey are oil-rich, and relative few European countries have access to meaningful oil reserves that are both nearby and cheap to exploit. It's not all about access to oil. Norway has robust oil reserves, but the country still has some of the most expensive gasoline in the world ($9.31/gallon). The difference is taxation. Taxes routinely make up 50% or more of the at-the-pump gasoline price, and it is perhaps ironic that Norway is both the leading producer of oil in Europe and has the highest taxes as well.

The Bottom Line

Clearly, different countries have different philosophies about taxation and the ideal transportation infrastructure. It is possible to argue that the extensive public transportation systems in Western Europe offer some compensation for the heavy gasoline taxation, while the subsidized prices of oil-producing countries gives those citizens at least some of the benefit of their nation's reserves. It's also clear, though, that gasoline prices come down to more than just taxes. Countries or states also have to have adequate supplies of the right kinds of gasoline, adequate refinery capacity and the ability to get the gasoline to market at a reasonable cost.

By SFGate

June 9, 2012:

NEW DELHI: Indian state refiners expect Western sanctions to choke Iranian crude oil supply next month, but oil minister Jaipal Reddy said the country was making alternative arrangements and there would be no supply disruption.  "Companies are in talks with several oil producers, and there won't be any problem," Reddy told reporters on the sidelines of an industry award function. Indian refiners have gradually reduced Iranian crude oil purchases, but government officials say that they have done this because of commercial considerations and there was no official pressure on them. Hindustan Petroleum and Mangalore Refinery and Petrochemicals , the main Indian buyers of Iranian crude, have already cut purchases, and are looking at alternative suppliers in the Middle East, Africa and South America.

IOC, the country's biggest refiner uses only 1 million tonne a year of Iranian crude out of its total requirement of over 60 MT, chairman RS Butola said. The oil minister also ruled out any change in prices of diesel, kerosene and cooking gas.

By The Economics Times

HARRISBURG, Pa. (AP) — Lawmakers briefed on Gov. Tom Corbett's package of financial incentives for a planned petrochemical refinery in western Pennsylvania said June 6 that it could also include the cost to clean up pollution from the zinc smelter that has operated there for decades. The revelation by two state senators is the latest about Corbett's negotiations on the facility with Shell Oil Co., a subsidiary of Netherlands-based oil and gas giant Royal Dutch Shell PLC.  The Republican governor's administration has shared with the public sparingly those plans on what lawmakers say would be the biggest package of taxpayer-paid incentives in Pennsylvania's history for a project being billed as the reindustrialization of the state.

Two senators briefed on the project, Sen. John Blake, D-Lackawanna, and Sen. John Wozniak, D-Cambria, said the project deserves serious consideration. Blake cautioned that the Corbett administration must show that the cost of the incentives must match the potential economic benefit to the state. The projected multibillion-dollar ethane cracking plant would convert ethane from the area's bountiful Marcellus shale natural gas liquids into more profitable chemicals such as ethylene, which are then used to produce everything from plastics to tires to antifreeze. Blake said the administration's financial incentive plans for Shell revolve around a recently disclosed tax credit worth up to $1.65 billion over 25 years and a newly created tax-free zone for the site that the Legislature approved in February. Department of Community and Economic Development Secretary Alan Walker and the other administration officials who briefed Blake and Wozniak earlier this week could not immediately provide a figure on the value of the newly created tax-free zone site to Shell, the senators said.

The tax-free zone "is a very lucrative tool, and I don't think we could have lured Shell without it," said Blake, who briefly served as the department's secretary under former Gov. Ed Rendell. But because Shell likely would have no state tax liability, it could sell up to $66 million in tax credits a year to companies that use its feedstock as a way to encourage a local market in Pennsylvania, senators said.  "If they don't do business here, they can't use the credits," Blake said. The tax credits will need legislative approval. In the meantime, some of the wet gas from the Marcellus shale region is already under contract to be piped down to ethane crackers on the Gulf Coast, taking the lucrative business elsewhere.

"If we have our ethane facility and all the manufacturing around it," Wozniak said, "we are getting the value added, and that's where you're going to be getting the jobs and building the manufacturing base." Besides the potential of offering a taxpayer-paid cleanup of the zinc smelter, the administration officials did not mention any other potential taxpayer-paid incentives for Shell, the senators said. But Wozniak said the cost of an environmental cleanup would be limited since the site is being turned into another industrialized use. "You're not making a park out of it," Wozniak said.  A spokesman for the Department of Community and Economic Development, asked whether the Corbett administration had offered taxpayer money to clean up the site, responded that any company purchasing a potential brownfield site could apply to a state land recycling program.

In March, Shell announced that it had picked a site on the banks of the Ohio River, near Monaca, about 30 miles northwest of Pittsburgh, and signed a land option agreement so it can further evaluate the site. Ohio and West Virginia also had sought the plant and offered Shell substantial tax incentives.  The Horsehead Corp. zinc smelter that is billed as the country's largest and is operating on the site is shutting down. In September the company announced plans to shut the factory by 2013 and relocate to North Carolina, along with most of its 600 workers.  Horsehead has said it would have to vacate the 300 acre-plus site by April 30, 2014, under the terms of the option agreement with Shell. Horsehead and Shell did not immediately respond to messages seeking comment.

By The Associated Press

June 9, 2012:

SAINT JOHN, N.B. _ Cheap western crude prices are driving the North American oil industry to find creative ways to ship oil east where refineries are struggling to remain competitive.  In recent weeks, the first rail shipment of Bakken crude oil from North Dakota arrived in Saint John amid word Irving Oil Ltd. is close to reaching a deal with an American fuel broker that would involve regular shipments of oil arriving by rail.  The net savings for shipping the crude oil, after accounting for the cost of transportation, are estimated to be about $7 to $10 per barrel, according to Pavel Molchanov, an energy analyst with Raymond James and Associates Inc., in Houston. ``It`s obviously not very cheap to ship crude from the mid-section of North America to the far reaches of Atlantic Canada, but it is cheaper than buying imported crude,'' he said.  The discount between Bakken oil and Brent crude, the European benchmark that East Coast refineries rely on for a majority of their stock, has averaged $27.75 a barrel this year, according to data compiled by Bloomberg.  Crude oil from the Bakken oilfields is cheaper than its counterparts because it is easier to extract and to refine into lighter products such as gasoline, diesel and jet fuel.

Marathon Petroleum Corp. (MPC), an independent American refiner with a network of pipelines, barges and rail operations, estimated in November that the cost of moving Bakken crude to the U.S. East Coast would be about $18 a barrel. The savings bode well for both railway companies as well as East Coast refineries. Last month, Imperial oil announced its Dartmouth refinery, after years of losing money, would be put on the market. ``Many refineries in Eastern Canada currently import oil from offshore and the opportunity to be able to connect the growing supply of western Canadian oil with refineries and the demand in Eastern Canada is a primary objective of what the industry is trying to do,'' said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers.  ``We would like to replace the foreign crude imports that are coming into that market now and they are being looked at through rail proposals as well as pipeline proposals that have been brought to the fore,'' he said.

According to a report published this week by CAPP, the industry will continue to rely on pipelines as the dominant mode of transportation for crude oil, but in the short-term, crude oil transported by rail will increase sharply due to the ability to use rail capacity relatively quickly and in small increments as needed. In the span of just one year, rail exports from North Dakota have risen to about 225,000 barrels per day in March from 50,000 barrels per day a year earlier, according to estimates by the North Dakota Pipeline Authority. According to Statistics Canada, about 8,823 rail cars were loaded with oil and other petroleum products in March 2011, compared with 5,602 rail cars a year earlier. In addition, TransCanada Corp. recently introduced the concept of a new pipeline system to transport about 625,000 barrels per day of western Canadian crude oil across the country to Montreal and potentially further east to Saint John.

``It would be a substantial benefit to have this infrastructure program because, should it be built, it will create lasting jobs, not only in the manufacturing industry but in the oil-refining business in Saint John,'' said John Williamson, MP for New Brunswick Southwest. He added that it would also be a benefit for the entire country because it would allow Canadian oil producers in the west to receive top dollars for their product while helping refineries on the East Cost become more competitive.

By Canada.com

June 9, 2012:

Suncor Energy is planning to do maintenance and repair work on a clogged sulfur removal unit at its Commerce City oil refinery, which may lead to additional burning off of gases.  Denver-area residents are likely to see more orange flames at the refinery. The unit that recovers sulfur will be shut down.  "This is part of general maintenance and repair for an oil refinery," state health department air division spokesman Chris Dann said. "There is a potential for additional emissions and odors."  Suncor officials announced the plans in an email Friday afternoon. The burn-offs could last for up to eight days.  "We have safely and successfully performed this type of work before," Suncor vice president for refining John Gallagher said in a prepared statement. "The flaring should not be visibly distinguishable from normal operations. We do not anticipate additional impacts to the community, such as noise elevation."

Shutting down the sulfur unit forces Suncor to "flare" more gases instead of recovering materials inside the unit.  Monitors from the state health department's Air Pollution Control Division plan to be at the refinery to oversee the work.  The refinery, which produces gasoline, jet fuel and asphalt, is one of the main sources of air pollution in metro Denver, according to state documents. The permitted emissions include particulates, sulfur dioxide, nitrogen oxides, volatile organic compounds, carbon monoxide and other hazardous air pollutants. 

By Denverpost.com