Why are there no new Oil Refineries built lately when price of Oil today is higher than it was 50 years ago?
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The regulatory burden is cost-prohibitive and/or excessively time consuming. Or, in ELI5: following the rules costs too much and takes too long.
We are approaching peak oil demand with the electrification of cars coming along and declining populations in the industrialized world. Companies don’t want to sink $20 billion into infrastructure for out dated energy sources when they could just use existing and raise prices to lower demand down to production capabilities.
Because they don’t make money off the price of oil. They make money off of how much they can sell the refined products minus the price of oil.
It’s also viewed as a losing investment. These refineries are expensive and can take a decade or more to pay off. The push toward EVs and renewables makes that investment less and less likely to be profitable in the future. Instead, companies opt to keep their existing refineries running for as long as they can.
I think you are referring to oil wells instead of refineries. Oil is a finite resource, when “easy” to get oil runs out prices will skyrocket permanently. Building more wells will only speed up that process.
This has to be answered depending on which country you’re talking about. Refined oil products ie the output of oil refineries has a particular demand curve to it. Refineries are built according to demand and not the price of oil.
In many of the EU countries and Japan, demand for refined oil has gone down over the last few decades. In the US, refined oil demand has remained more or less flat since for the better part of 3 decades. This accounts for a great deal of the total demand.
Most of the growth in refined oil demand over the last few decades is in China and India. Both countries have their own refining capacity and expand it over time.
Oil refining tends to be a “local” business (except for countries like Singapore who sell to nearby regions) so if the demand isn’t there locally, more refining capacity isn’t built. Given the flat or falling demand, it makes more sense to refurbish and upgrade existing refineries rather than invest in new ones. Refineries are hugely expensive, take lots of time to get permits, and require many years of operation to breakeven.
Many developed countries have specific policies to reduce the use of gasoline/petrol for private vehicles in the next decade or two. This is not a good environment to invest in new refineries.
Because Biden said he intends to drive the fossil fuel industry out of business by 2045. Why invest billions in refinery capacity when the gov’t is against your industry? Its all going away in 20 years after all no matter what according to the gov’t.
Figure it takes 5-7yrs to build a modern refinery. Then another year getting it running correctly. Then it needs to make its money back, that takes another 7-10yrs or more. We’re talking a min 14yrs to break even, just to have to tear it down in a few years. Which will cost more billions. So why bother?
Your basic premise is incorrect. There are new refineries being built every day. I know this because not only am I an enviro attorney but I am from a crappy Texas Gulf Coast town and last year (and two years before) the town was thrilled to announce new business ground breaking!
What were the new businesses? Two more refineries.
Refineries (new and ‘retrofitted’ [not retrofitted]) are clipping along in Texas and Louisiana. Or – as some environmental groups call it – ‘Cancer Alley’.
Refineries, pipelines (national and international), conversion plants, pump fields, oil ships, offshore rigs.
Don’t worry OP! Big Oil is alive and well.
In general, there is an inverse incentive where it costs big money to build more refining capacity, but more refining capacity will lead to lower fuel costs because less capacity increases the sale price of beyond what would be made by a higher volume of sales
Your question seems to assume that oil companies would be interested in producing more oil, creating more supply, and lowering the cost overall.
Why would you think that?
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