Tuesday, 21 June 2022

Another Big, Fat Lie

Unless you are a prepper living off-grid in the Alaskan wilderness, you will have noticed that fuel is costing more than it has ever done before. Round the world people are keen to blame their enemy of choice, in the US, it's because of "Putinflation" and in the UK it's "because of Brexit". Elsewhere it's the profiteering oil companies. In reality it's none of these, it turns out to be caused by what David Cameron memorably called "green crap".

As the CEO of Chevron explains, no-one is building refineries any more. Refineries are hugely expensive and the Alarmists have been saying for years that fossil fuels are on the way out, with governments pledging to ban the sale of new petrol and diesel cars and natural gas boilers, so why should any company invest in a new refinery? This also means that the refineries we do have are old, 50 years plus in the US, probably the same in the UK. As the refineries wear out, they have been being shut down, leading to a shortage of refining capacity that has reared it's ugly head before. As capacity decreases, demand, unfortunately, has not decreased at the same rate, leading to the inevitable result that the cost of refined fuel has increased faster than the cost of crude oil.

Never mind, let's blame it on Uncle Vlad, eh?


Mark Wadsworth said...

Seems plausible.

A K Haart said...

Interesting. It's refreshing when an explanation comes along which is clearly rooted in the real world rather than arm-waving.

Mark Wadsworth said...

Having thought about it, it does not explain why crude oil prices started going up about six months ago.

If there were fewer refineries buying the stuff, there would be less demand for crude and prices would be falling.

I'm not sure anybody's blaming the price rises of six months ago on Mad Vlad, just the current surge.

Lola said...

MW. The refinery capacity has been shifted offshore - to Russia among other places. So the demand for oil has been consistent.

Mark Wadsworth said...

L, this was B's post.

Bayard said...

Mark, it is the increase in price of the refined products that everyone is worrying about, not the increase in the price of crude. Crude really isn't any higher than in 2014, certainly not when you allow for inflation.

I have also seen the following statistic. In 2008, crude was $144 a barrel. Petrol was £1.20/l. Today, crude is $113/barrel, but petrol is £1.86/l. Sure the collapse of the pound against the dollar after Brexit hasn't helped, but it's the same story in the US. Ol' Joe has even, apparently written to the oil companies to complain about it.

Mark Wadsworth said...

B, so ignoring tax increases and FX changes, the element of pump price that relates to refining costs has gone up by about 50p a litre?

Bayard said...

Mark, that's what they are saying.

L, if that's true, it's been kept very quiet and makes the "cutting off your nose to spite your face" element of the so-called sanctions even greater.