Blog neighbor Doug Maurstad continues to marvel at the shifting stories from the Hyperion windbags who claim they can build a profitable oil refinery in his beloved Union County. He says that instead of supporting Texas pipe dreams, we'd be better off if we just lived more simply and used less gasoline.
Talk like that about frugality and self-reliance might get Doug in good with our governor, but it won't make friends in the oil industry. Conservation is the last thing the oil industry wants us to pursue. But conservation, along with energy efficiency and the search for alternative fuels, is a big part of why there hasn't been a market for a new oil refinery in the United States since the 1970s. Don't take it from Doug and me; take it from The Economist:
The refining business has suffered from chronic overcapacity, and thus weak margins, since the 1970s oil shocks, which led to a slump in the use of oil-based fuels for generating electricity and heating homes. A respite came in 2005-07, as a buoyant rich world and increasingly thirsty emerging economies boosted demand. But that was a high point that the rich world may not hit again. Demand for petrol in America has fallen, and may never regain its previous peak. Refining margins, having touched $4.50 a barrel, are down to one-tenth of that and still falling ["Refined Tastes," The Economist, 2011.04.07].
The biggest obstacle to the Hyperion refinery is not the odd combination of tree-huggers like me and cranky codgers like Maurstad. It's not confounded Gaia-fetishizing environmental regulations. It's the market. The smart businessman refining oil in South Dakota would look for ways to hook his product into the really profitable expanding markets overseas, not into the stagnating domestic market. The really smart businessman wouldn't plunk his refinery in the middle of the continent in the first place; he'd build that refinery on the coast, as close to the big foreign buyers' boats as he could.
Hyperion's not happening, people, not in Union County. The market says so.