dz09
Posts: 360
Joined: Mon Sep 11, 2006 1:20 am

Airline Owned Oil Refineries

Mon Sep 11, 2006 10:41 pm

Have airlines thought about owning small scale refineries around major hubs in the country to meet their fuel demands and reduce cost? With the insane profits Exxon and the likes are making, it seems to me that they could not go wrong with doing so.

Cheers.
 
commavia
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RE: Airline Owned Oil Refineries

Mon Sep 11, 2006 10:48 pm

Don't know about a refinery, but back in the 1970s, American had a fuel division called the "American Airlines Energy Corporation" (or similar) that did fuel exploration. It was closed in the early- to mid-1980s, if I'm not mistaken.
 
Ciro
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RE: Airline Owned Oil Refineries

Mon Sep 11, 2006 11:53 pm

Very unlike to happen. Airlines are, more than ever, looking for ways to focus on their core business which is to fly passangers from one point to another. Anything different from that will only add complexity and potential costs to a managerial system that already lacks all sorts of competencies and resources.
The fastest way to become a millionaire in the airline business is to start as a billionaire.
 
Gr8Circle
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RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 12:10 am

Not directly addressing the topic of the thread....however, most of the airlines in the Middle-East, atleast the GCC countries, as good as own the source of oil, because they are govt. owned airlines.....however, I really don't know what pricing arrangements they have when fuelling in their home bases....eg. EK in Dubai, or EY in Abu Dhabi or even SV in Suadi Arabia....do they get fuel for a different price as compared to a foreign airline fuelling in those countries...?
 
TeamAmerica
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RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 12:20 am

No! This is one of those things that might sound like a good idea, then you think about and realize it's not.

Small scale refineries? You lose all economies of scale. Costs would not be competitive with the market. Do you have any idea how difficult it is to get an air permit these days? Not gonna happen.

Exxon's profits are sadly very logical, not insane at all. We demand fuel, they have it. We pay, they profit. The insanity is on our side, not Exxon's.

Even if US carriers had piles of cash to do something like this, it makes no sense. They could not go more wrong.
Failure is not an option; it's an outcome.
 
ANCFlyer
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RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 12:25 am

Try the Search Engine - DZ09 - this has been discussed, at length, in the thread below.

RE: Any Airlines Owning Refineries? (by Trvlr Mar 16 2006 in Civil Aviation)#ID2661386
FOR THOSE THAT FOUGHT FOR IT, FREEDOM HAS A FLAVOR THE PROTECTED WILL NEVER KNOW OR UNDERSTAND
 
dz09
Posts: 360
Joined: Mon Sep 11, 2006 1:20 am

RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 12:32 am

Quoting TeamAmerica (Reply 4):
No! This is one of those things that might sound like a good idea, then you think about and realize it's not.

Small scale refineries? You lose all economies of scale. Costs would not be competitive with the market. Do you have any idea how difficult it is to get an air permit these days? Not gonna happen.

Exxon's profits are sadly very logical, not insane at all. We demand fuel, they have it. We pay, they profit. The insanity is on our side, not Exxon's.

Even if US carriers had piles of cash to do something like this, it makes no sense. They could not go more wrong.

Producing Jetfuel is the the easiest process in refining oil. I am not suggesting that the airlines get into the oil business, but rather a consortium of airlines investing in an oil refining company, maybe existing ones. I understand that Citgo is planning of selling all their US refineries and leaving the US market.

As to the profits Exxon and others are making, I do believe they are insane but that's another topic in itself and this forum is hardly the place for it.

Cheers.
 
dz09
Posts: 360
Joined: Mon Sep 11, 2006 1:20 am

RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 12:34 am

Quoting ANCFlyer (Reply 5):
Try the Search Engine - DZ09 - this has been discussed, at length, in the thread below.


RE: Any Airlines Owning Refineries? (by Trvlr Mar 16 2006 in Civil Aviation)#ID2661386

Sorry about that. I did not realise it was discussed before. No more comments from me on this subject.

Cheers.
 
HiJazzey
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RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 12:42 am

I doubt that would work. Refining is a volatile business at the best of times, it would be even more difficult without the benefit of economy of scale.
 
ANCFlyer
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RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 12:52 am

Quoting DZ09 (Reply 7):
Sorry about that. I did not realise it was discussed before. No more comments from me on this subject.

No worries . . .

Best to search the forum subjects when posting a new thread just in case it's already been discussed in the last few months . . . very often the topic is there. Sometimes the topic is pretty old - so post a new one. Sometimes it's a recent topic - unless it's locked or archived, just add to that topic.
FOR THOSE THAT FOUGHT FOR IT, FREEDOM HAS A FLAVOR THE PROTECTED WILL NEVER KNOW OR UNDERSTAND
 
JayinKitsap
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RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 1:52 am

In the last 30 years a lot of refineries in the US have closed down, mostly due to the capitol cost to comply with the various environmental regulations. If it made sense economically to build or enlarge refineries wouldn't you think that the oil companies would do it. Until around 2000 there was enough refining capacity in the US, but with the 40 some formulations of gasoline needed there were localized shortages. We have since passed the optimum supply /demand balance but it takes 5-6 years to obtain the permits to enlarge an existing refinery, then 2 to 3 years to construct.

The voltility is in the crude oil side of the equation. It is far smarter for an airline to hedge using fuel oil (generally tracks parallel to jet fuel) to reduce risk exposure to price spikes. Then also you can buy hedges when the market troughs occur and hold during the spikes. WN did very well doing this, but they invested a lot of $ in those hedges (basically paying for the oil in full several years in advance.) Then the airline doesn't need to run the oil business just cover the risk with voltility.
 
Tan Flyr
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Joined: Sat Aug 19, 2000 11:07 pm

RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 2:44 am

Quoting TeamAmerica (Reply 4):
No! This is one of those things that might sound like a good idea, then you think about and realize it's not.

Small scale refineries? You lose all economies of scale. Costs would not be competitive with the market. Do you have any idea how difficult it is to get an air permit these days? Not gonna happen.

Exxon's profits are sadly very logical, not insane at all. We demand fuel, they have it. We pay, they profit. The insanity is on our side, not Exxon's.

Even if US carriers had piles of cash to do something like this, it makes no sense. They could not go more wrong.

Well Put. As someone else mentioned, a lot of "smaller" long established refineries have closed since the late 80's/ early 90s due to tougher air permits.
No new refineries have been built since the completion of the Marathon refinery at Garyville, LA in the mid 70's. Only ONE new refinery is on the drawing boards within the US, the Arizona Clean Fuels refinery at Yuma, AZ.
www.arizonacleanfuels.com/refinery.htm

Globally, there are a number of new plants being designed and plans laid to build. The US will unfortunatly still be in a situation to import 12-15% of its' fuels, already refined, from other sources.

Thus, the profits, jobs, taxes, all economic benefits go somewhere else.

Airlines should stick to flying airliners. evertime one of them has dabbled in Hotels, rental cars, food services, etc, it just drains capital and talent from running the true business.

If building refineries was a great idea, I'm sure Roadway, Knight transport, and other huge trucking outfits would have thought of it.

Eschew sesquipidalian obfuscation
 
N1120A
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RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 2:46 am

Quoting Commavia (Reply 1):
Don't know about a refinery, but back in the 1970s, American had a fuel division called the "American Airlines Energy Corporation" (or similar) that did fuel exploration. It was closed in the early- to mid-1980s, if I'm not mistaken.

Probably started to handle the business of potential oil reserves undr their Texas property.
Mangeons les French fries, mais surtout pratiquons avec fierte le French kiss
 
YULWinterSkies
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RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 2:54 am

I see a problem here. Major problem. The "insane" profit that the oil companies make is not made at the refinery but in the oilfield. Refined fuel prices are high BECAUSE crude oil is $80/barrel, whatever the reason of such a price for crude.

Maybe you are thinking of what you pay to fuel your car at your favorite local gas station which indeed varies quite a lot depending on which days of the week, which period of the year you fill up, etc... This is another major source of profit for the oil companies but does that apply to jet A1 too?
When I doubt... go running!
 
tayaramecanici
Posts: 241
Joined: Sat Sep 09, 2006 5:03 am

RE: Airline Owned Oil Refineries

Tue Sep 12, 2006 5:15 am

Quoting Gr8Circle (Reply 3):
EK in Dubai, or EY in Abu Dhabi or even SV in Suadi Arabia....do they get fuel for a different price as compared to a foreign airline fuelling in those countries...?

Does it make a difference in the figure quoted, its only a change of accounts for the cash, ownership never changes.............cook the books.
''You are as good as your nearest competitor'' Bob Crandall.

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