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Ol Badger wrote:

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DCBadger7 wrote:

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Do not underestimate the power of the futures markets.  What happens in the petroleum market has as much to do with psychology as it does with tangible facts and actions.  

So, markets don't always work perfectly?  Sometimes they exhibit "irrational exuberance" or even "irrational lifelessness"?  Well, I never! 

I think the point of the article is that the possibilities with Iran already have been adjusted for, and the Saudis are prepared to counter any shortages.  I didn't know the Sunoco refinery was closing.  Any idea why?

Yes, because Sunoco's northeast refining business has lost nearly $1 billion over the last 3 years.  They have to stop the bleeding before it takes the entire company down.  This is why Sunoco is getting out of the refining business.  They want to sell their refineries rather than close them, but thus far interest has been modest at best.   

Why?  Because there is an excess of refining capacity in the U.S. and Europe, and as a result many refiners are in dire straits.  Definitely check out the story yanked linked - it does a nice job explaining the light sweet crude issue.  In essense, Sunoco has to use a more expensive type of crude oil because of how its refineries are set up.

The simple truth their refineries in PA are uneconomic and it makes no financial sense to invest in the upgrades necessary to make them competitive.  Sunoco would have to invest upwards of $100 million (this is a guesstimate) to upgrade the Philly refinery in order to be able to process other types of crude.  Well, why make that investment when there's a glut of capacity already?  What are the odds they'll make their money back?  This is also why there has been limited interest from potential buyers - they, too, would have to make those investments.  Could they do so and get a reasonable return on it?  Seems doutbful.

Refining in the Northeast U.S. is withering on the vine.  Two small refineries closed in 2010.  Sunoco idled (essentially means stopped, but not closed) its Marcus Hook, PA refinery in December.  ConocoPhillips idled its Trainer, PA refinery in September.  Sunoco Philly will idle this July if a buyer isn't found first.  These losses are partially offset by the restart of a Delware City, DE refinery in 2011 that was shut in 2009 and sold in 2010. 

But the trend is clear.  This is happening because refining is a global business.  Individual refineries have to be able to compete globally, or at a macro level.  Those that can't, that are still built and operated on a regional basis, or a micro level, are going to go away because they can't stay financially competitive.