Energy Losers in Oil Boom

High oil prices have resulted in a boom for some of the largest oil companies in the world. The huge demand created by China, India, and other countries in the pursuit of modernization has created a situation that has led to gas prices that are multiples of what they were a few years ago. As a result, corn prices are exploding due to the pursuit of ethanol and biodiesel is raising the value of untold other agriculture products. Yet, not every energy business has directly benefited. Why? Because high prices has actually reduced demand for the first time in almost two decades.

Two of the biggest losers in energy from high oil process are retail locations and refineries. Both of these type of companies are far more effected by demand than gas prices.

ABC News reports that Exxon Mobile, "the world's biggest publicly traded oil company, said it now plans to sell to distributors its remaining 820 company-owned stations and another 1,400 outlets operated by dealers." Citing ABC, the company also reported that the reasoning behind the decision was because 'As the highly competitive fuels marketing business in the U.S. continues to evolve, we believe this transition is the best way for Exxon Mobil to compete and grow in the future,' said Ben Soraci, the director of Exxon Mobil's U.S. retail sales."

Meanwhile, the Houston Chronicle is reporting that "after three years of record profits, the U.S. refining industry has been confronted recently with a hard truth — that the party may be ending."

"Refiners' profits have plunged this year as record crude oil prices have sharply boosted fuel-making costs. At the same time, higher prices at the pump are softening demand for gasoline and diesel, limiting refiners' ability to pass along the bill."

Ironically, these stories come out rather close to the announcement that the United States is opening its first refinery in decades. There is now a great deal of talk about increasing domestic oil production. That rhetoric may have to become reality in order to create good news for these suffering businesses.

According to recent surveys on marketing, most advertising attracts sellers (others who want you to buy more ads) and not buyers. Do you want to know why? Email info@HoustonBusinessShow.com and put "marketing audio" in the subject line and we will get it to you.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

First New Refinery in Decades

There are only a few operating refineries in the country. The bureaucracy to get a license for such is years and the political environments are very hostile to the development of energy independence -- a stated priority of virtually every politician. With the average cost of gasoline approaching $4 a gallon, that might all be changing.

For the first time since 1976, the International Herald Tribune is reporting that the path is being open for the creation of a new refinery in South Dakota. This is the first new one in this country since 1976 and should have the capacity to produce 400,000 barrels of crude from Canada daily. This will certainly contribute to lower energy prices.

In addition to being good for energy independence, it has the potential of creating almost 5,000 short term jobs in the plant's construction and 1,800 long term jobs for those who will work at the plant once completed. The company, Hyperion Resources, has indicated that those jobs will have an average salary of $20 to $30 an hour. Good paying jobs in a part of the country that needs them.

I, for one, am mainly pleased to simply see that the US is taking some small step in the effort towards energy independence. If you want to call $10 billion, the cost for the project, small. Energy independence, which makes our economy strong, our people prosperous, and our nation more secure from our enemies (who are the biggest beneficiaries of our current energy crisis) needs to be at the top of our nation's priorities. Steps like the opening of this refinery are certainly actions in the right direction.

According to recent surveys on marketing, most advertising attracts sellers (others who want you to buy more ads) and not buyers. Do you want to know why? Email info@HoustonBusinessShow.com and put "marketing audio" in the subject line and we will get it to you.

Kevin Price is Host of the Houston Business Show (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.