The US Oil Refining Industry - Annotated Bibliography Example

REFINERIES AND THE ECONOMY IN U.S Affiliation REFINERIES AND THE ECONOMY IN U.S Anthony,A. & Pirog, R. . The US oilrefining industry: Background in changing markets and fuel policies. Congressional Research Service According to Anthony and Pirog, there has been a rise in the oil prices in the United States of America. For example, it is indicated that the oil prices have exceeded thirty US dollars per barrel. The gasoline prices have also gone up surpassing two dollars per gallon of gasoline. The same has happened to natural gas which equally recorded a major rise in its prices. This is a significant rise from the prices that had been recorded since the year 1991. This has seen some states like California experience major electricity supply hitches occasioning in intermittent blackouts. These problems can equally be attributed to utility deregulation. All these problems in the energy sector in the US have been argued to have stemmed from both the environmentalists and the federal government of the US. It is argued that they discouraged oil exploration by investors in the 1990s. The rising oil prices have been blamed on Organization of Petroleum Exporting Countries’ planners and the domestic refineries failure to do proper calculations . Davis, S. (2014). Can U.S refiners invest for success? Wood Mackenzie. It is from this background information that the ensuing discussion will give an overview of how more refineries in the United States would affect the economy. The debate over the impacts of a growing number of refineries in the U.S on its economy is a very intricate one. It can be appropriately examined by putting into consideration the arguments that persons pursue. These would be the explanations that they offer in backing their claims as well as the evidence that they provide in support of those claims. Some contend that a growth in the number of refineries in the U.S would responsible for the inflation of the economy. This is because they reduce the rates of competition while at the same time contributing to the inflation of prices. There is equally an argument that a growth of refineries in a country increases the number of chemical substances released into the atmosphere. These chemical substances are potential harmful and they will lower the economic growth of a country. Energetics Incorporated, (2007). Energy and the environmental profile of the U.S petroleum refining industry. U.S: Department of Energy Industrial Technologies Program. It is contended that a growth in the number of refineries will create job opportunities for the citizens of a country. The refineries will equally be a significant source of revenue to the government. The creations of job opportunities for the citizens as well as revenue for the government all have one thing in common. They improve the economic growth of a country. The growing concentration in the proprietorship of the refinery industry is decreasing competition and thus underwriting price inflation. The petroleum industry has been surrounded by a significant element of mergers and acquisitions in the past two years. For example Exxon, Phillips and Chevron acquired Mobile, Tosco Corporation and Texacco respectively. The British petroleum equally took over Atlantic Richfield and Amoco. These integrated oil refineries were able to reduce external competition that existed between them through the mergers. With these mergers and acquisition, these refineries developed the capability to heighten the oil prices. Environmental Protection Agency, (2015). Economic impact analysis for the petroleum refineries. US: National Service Center for Environmental Publications. According to the article mergers and acquisition have negative effects to the economy. These mergers and acquisitions made these companies to be dominant players in the market. This puts them at a position in which they can inflate the prices of oils for their selfish gains. Abuse of power by dominant players in the market has been shown to have devastating effects on the economy of a nation. It is for example indicated that Philips after the merger with Tosco Corporation became the second largest oil refinery in the U.S. Being a dominant player in the market means that an oil refinery is in a position to influence the economy of a nation. This is more importantly through the exaggerated prices that they will set for their oil and its products. Hittle, A., L. (2014). Will OPEC sideline U.S producers by defeating tight oil? Wood Mackenzie Based on the article, Little or nothing can be done about this hiking of prices due to the absence of competition. Oil has also grown to be a basic commodity in any nation and the consumers have no option often times but to comply with the prices set by the oil refineries. Instead of a country improving its economy, the state of the economy will only deteriorate with these actions of the dominant oil refineries. Research shows that mergers and acquisition are only responsible for the increase in the profitability of the refinery and not the economy of a nation. There is a direct correlation between the prices of oil in a country and the economic improvement/growth of that country. If the prices are higher, the economic growth will decline. On the other hand, if the prices are lower, the economic growth will flourish. LeRoy, C. (2015). Refining U.S petroleum: A survey of U.S refinery use of growing U.S crude oil production. American Fuel & Petrochemical Manufacturers. According to the article, the growth of the economy is dependent on the number of refineries in a country. From this argument, a growth in the number of refineries in the United States will therefore lead to a growth in the economy. A lot of refineries will produce huge amounts of oil that will meet all the needs of the consumers in a country. The consumers will therefore be in a position to undertake their daily activities that are geared towards the growth of the economy. The oil would for example be consumed in the business environments that are engaged in income generating activities. These activities will provide revenue for the government. It will thereafter be put into various uses like the development of infrastructure and the health sector. If the infrastructure is improved, then the citizens will have an efficient of the transportation of their goods and services to the market place. This will equally enhance the economic growth of a country. Senate, (2006). Speculation adding to oil prices. US: Senate Committee on Homeland Security & Governmental Affairs. According to the article, when the health sector is enhanced, it means that the citizens will be in good health status to run the economy and lead to its improvement. The amount of oil that is consumed by a given country can be said to be directly proportional to the economic growth of that particular country. It is for example argued that the higher the amount of oil consumed, the higher the economic growth of the country. This argument can be translated to mean that the lower the amount of oil consumed in a country, the lower the economic growth. Therefore to ensure that the economy constantly rises, a lot of oil has to be produced and consumed in a country. The question which then arises is how will the huge amounts of oil be produced? The answer to this question is pretty straightforward. From the analysis of the above arguments, there will have to be a growth of the number of refineries. Sulfur components into the atmosphere are very harmful to the environment. Among the many environmental problems that can be occasioned by these sulfur components are an increase in global warming. There can also be an increase in the number of sulfur-related diseases among the citizens of a country. A country will therefore be forced to spend a lot of money in order to counter the effects of these sulfur components that would have been emitted into the environment. This potentially means that instead of enhancing its economic growth, the country will be facing a bigger financial crisis that would potentially ruin the probable growth of its economy. Technology Vision 2020, (1999). A report on technology and the future of the U.S petroleum industry. American Petroleum Institute and National Petrochemical & Refiners Association. Many refineries will pull effort to produce the huge amounts of oil. Therefore, a growth of the number of refineries in the U.S will lead to a growth of the economy. This can be reflected in the lowering of the prices of oil. It is common knowledge that the lower the prices of oil, the higher the economic growth. When the numbers of refineries are high, the domestic production of a country is increased. This means that the oil refinery will be making profit. The increase in the profitability of the oil refining companies also means an increase in the amount of revenue that is paid to the government. It is this high revenue to the government that can definitely increase the economic growth of a country. The revenue to the government acts as a financial security to that government. Throughout history, it has always been recognized that the flourishing economies of the world are those that are financial healthy and secure. It is therefore possible for a government to obtain this financial security through the huge amounts of revenue that many refineries will bring to it. An increase in the number of oil refineries in the U.S will form a perfect industrial base for the country. It will also provide the relevant security needed in the energy sector. However, all these advantages come with their own disadvantages. As I mentioned earlier in my thesis statement, oil refineries are capable of emitting dangerous sulfur components into the environment. This is if there no proper mechanisms in the manner that these refineries have structured themselves. All in all, even in good structures, there is still a probability if the emissions of these sulfur contents into the atmosphere. The risk is enhanced further by the presence of a greater number of refineries. It means that the higher the refineries, the higher the amount of sulfur components emitted into the atmosphere UNFCCC, (2006). Kyoto protocol. Refineries in a country are equally employers. They can employ individuals to work in its various departments. For the growth of a country, what is of interest is the wages/salary that these employees are paid from those refineries. This salary is not only for their benefit but also for the benefit of the government. But how then does the government benefit from the salaries of its citizens? All forms of government in the world are known to administer various modes of tax. The tax would be in the form of income tax, direct, tax, indirect tax among many others. The employees in a company are obligated by the government to pat taxes. There is no known special exclusion from tax from the employees who work in a refinery. If the number of refineries in the United States grows, there will be a significant increase in the number of employees in those refineries. All these employees will pay tax to the government in the form of income tax. Tax is revenue to the government and as we have seen from our foregoing discussion, more revenue to the government means a growth in the economy. A high number of refineries in a country will increase the competition. In order to curb this competition, some of the oil manufacturers would be forced to lower the prices of their oil and its products. The lowering of these prices would be for the purposes of retaining customers while at the same time maintaining its profitability. This is to the benefit of the economy. From the foregoing analysis, it is clear that a strong future in the energy sector for the United States of America depends on two things. First, it is ability to refine its oil. Second, its ability to distribute the fuel needed. All these will be made possible with a growth number of refineries. The refineries will equally ensure the economic growth of the U.S. From this discussion, the number of advantages outweighs the disadvantages of having many oil refineries in the U.S. It is therefore important that the refineries are more so that the economic growth is enhanced. UOP, LLC, (2006). Changing refinery configuration for heavy and synthetic crude processing. When the consumers spend less money to purchase the oil, it means that they will have other money at their disposal to spend in pursuing other activities that will increase the economy of a country at large. However, an increase in the oil prices will mean that the people will not have the money needed to spend on other basic needs, for example clothing, shelter and food. Most of the money will be spent for the purposes of purchasing oil and the rest of the economy will be left to suffer as it will not be catered for. A lower number of refineries in a country as I have earlier mentioned leads to the inflation of prices of oil. The inflation will equally reflect in the inflation of the economy. When the inflation rates in a particular country are up, the central bank of that country will increase the rates of interest. This is so as to maintain or to balance the economic equilibrium of a country. For example in the year 2004 to 2006, the inflation rates of energy in the United States of America were recorded at a percentage of thirty five. This was according to a research conducted by the Consumer Price Index. This inflation rate of 35% was responsible for the rise in the total inflation rates in the federal government from 1% to 6%. The central bank of the United States followed suit by increasing the rates of interest. The increase was estimated to be five times the previous rates. Read More