Refining capacity. Where to start? If you believe as I do, that the world is nearing its peak of crude production capacity, it would be folly to build up refining capacity wouldn't it? After all, the peak of crude production by its very nature implies that there will be less oil to refine in the future. Since it takes time and money to build refineries, why would I invest my money in the capacity to do something that won't be needed, that will be excess capacity within five years?

In principle since the peak of production capacity is a tansitory event, you would be foolish in the extreme to build your refining capacity to service this volume since it simply will not exist once the peak is past.

I commented yesterday that there is some truth to the suggestion that lack of refinery capacity (or lack of complex refining capacity) can have an impact on crude prices - or at least crude spreads. So, I wanted to make sure that it is clear that I agree with this post that it is a minor factor. The Saudi position is obviously a red herring.

The Saudi's also know that building refining capacity is not as easy as it sounds. Even without peak oil considerations (which I agree have to be a factor), huge capital costs, low historic returns, regulatory policy, and public opposition have combined to stop the construction of new refineries in the US for years. Even in growing markets with low capacity levels, such as the Asia region, refinery economics are daunting.

So when they say "build, build, build", they certainly being disingenuous. But why do they think this arguement will be pursuasive? It also seems coordinated with US administration efforts to encourage refinery construction. I think there s more here than meets the eye.

*

1. The charts in the article are terrible, virtually unreadable.

2. His most egregious claim is not that high oil is caused by lack of refining capacity: it's his armchair psychoanalysis of Americans being "traumatized" by Sept 11, 01. Yes, he says this:

"Adults generally change and grow psychologically only after traumatic experiences. September 11, 2001 was a trauma for our country and most of the world. We are afraid but we now have our eyes wide-opened." THIS is why we have high oil prices. I am not making this up: "The 2001 attacks also ushered in the present cycle of high oil prices that began, to pick a date, around November 15, 2001."

3. He claims in a cheesy geology-clas metaphor that "people are making and publishing high level interpretations without first getting close enough to the data to observe and describe what is there." Can you believe he has the gall to say such a thing about Deffeyes, Campbell, Simmons, Laherrere, Pfeiffer, etc.? Oops, sorry, he never mentions them by name, so what we have is a classic STRAW MAN.

4. I finally realized the writer was insane when I read this: "I do not think we are entering a permanent energy crisis nor do I accept the commonly held view that the United States is an extravagantly wasteful country when it comes to energy. We have great demand for petroleum and create substantial wealth for the world as a result. How, for instance, could China have developed economically without U.S. investment and trade? I agree with Michael Economides that the United States is perhaps the most efficient country on Earth in its use of energy: we just use a lot."

Yeah, because that huge percent of oil that we use on SUVs is really efficient...

(OK, OK, now I'm going to go read the article for real. Maybe I'll have something substantive to say.)

In the meantime, if you like that sort of stuff, I leave you with some classic Ann Coulter.

It would be interesting to look into how well our refinery capacity will hold up as the proportion of heavy/sour crude increases. Even as production levels off and then begins to decline, I would not be surprised to see continuing refining capacity challenges. In any case, it's an all too convenient way for the Saudis to point their finger back at the consumer countries.

I'm hopeful that the concerns presented in Twilight in the Desert will begin to work their way into more media reports on this issue. It would be nice to see a "but..." in more articles about OPEC's potential to increase production.

I read through the whole thing and this guy is ignoring the fact that everything in his charts point to the fact that Peak Oil has already arrived for many countries. To research and write all that and to be that blind to the simple truth is quite amazing. I think this guy will be saying Peak Oil hasnt arrived when he's paying $7 a gallon for gas. He'll likely blme it on some one or some other outside force.

Basically he doesnt know what hes talking about, but is ranting off some figures to try and argue against Peak Oil. Kinda funny.

Its like knowing Big Bad News in coming but using every little blip of good news to try and say "See! I told you its not coming" hes lost in his own truth and dillusional thinking.

Hey - it's just MSM smoothing the waves in the TV audience pool. Admission that we might be facing something bad is anathema to "selling news". More critical to them is what Paris Hilton might wear tomorrow or who Brad Pitt REALLY has the hots for, right?

Never forget the source here - there is always a reason they pick specific people to interview rather than go to the sources.

Blog on, brothers and sisters!

Yes, I think there is a heavy does of racism mixed in with free market fundamentalism that causes these people to think that the state run oil companies in the Middle East are incapable of efficiently exploiting their resource. For the last thirty years, these folks have sent their best and brightest to the finest universities in the world. Oxford, Cambridge, Cal Tech, MIT, The Colorado School of Mines etc. These people have gone back home and used their copious oil revenue to employ the most modern technologies and best practices available. After all, for most of these countries, these nationalized oil companies represent the government's primary source of income. And if there is one thing a government is generally focused on it is collecting revenue.