THE CRUDE OIL MARKET 211
Industry representatives emphasized the regional character of
the markets in the United States. This point was brought out in reference to the following:
1. Regional business strategies of refiners
2. The constraints imposed by refinery locations
3. Pipeline infrastructure
4. Fuel specifications.
In addition, market volatility and potential supply shortfalls,
should they occur, are most likely to be of regional, not national,
scope. The Gulf Coast, Eastern Seaboard, and Southeast are seen as
the least-vulnerable regions because of the concentration of refineries and pipelines there and the greater accessibility of imports. The
West Coast and Midwest were frequently cited as regions of concern because of regional environmental regulations and the lack of
easily accessible alternative supplies, among other issues.
Increased imports of refined products, particularly motor gasoline, combined with growing imports of crude oil could make the
U.S. increasingly vulnerable to shocks originating in the world
oil market. Importing motor gasoline into the U.S. in appropriate
volumes may become increasingly difficult because of the unavailability of world supplies consistent with fuel specification requirements in the Unites States.
Finally, not all investment decisions are driven by refinery economics and market analysis. Refiners also make investment decisions because of voluntary actions or legislative and regulatory
requirements. In recent years, governments and industry have
directed considerable effort towards reducing the environmental
impact of burning fossil fuels. Many of the initiatives have been
aimed at providing cleaner fuels. Petroleum refining is a very complicated and capital-intensive industry. New environmental regulations require industry to make additional investments to meet the
more stringent standards.
7.4 Profitability
Oil company profits have increased over the past five years and
have been very impressive.
Industry representatives emphasized the regional character of
the markets in the United States. This point was brought out in reference to the following:
1. Regional business strategies of refiners
2. The constraints imposed by refinery locations
3. Pipeline infrastructure
4. Fuel specifications.
In addition, market volatility and potential supply shortfalls,
should they occur, are most likely to be of regional, not national,
scope. The Gulf Coast, Eastern Seaboard, and Southeast are seen as
the least-vulnerable regions because of the concentration of refineries and pipelines there and the greater accessibility of imports. The
West Coast and Midwest were frequently cited as regions of concern because of regional environmental regulations and the lack of
easily accessible alternative supplies, among other issues.
Increased imports of refined products, particularly motor gasoline, combined with growing imports of crude oil could make the
U.S. increasingly vulnerable to shocks originating in the world
oil market. Importing motor gasoline into the U.S. in appropriate
volumes may become increasingly difficult because of the unavailability of world supplies consistent with fuel specification requirements in the Unites States.
Finally, not all investment decisions are driven by refinery economics and market analysis. Refiners also make investment decisions because of voluntary actions or legislative and regulatory
requirements. In recent years, governments and industry have
directed considerable effort towards reducing the environmental
impact of burning fossil fuels. Many of the initiatives have been
aimed at providing cleaner fuels. Petroleum refining is a very complicated and capital-intensive industry. New environmental regulations require industry to make additional investments to meet the
more stringent standards.
7.4 Profitability
Oil company profits have increased over the past five years and
have been very impressive.