As I was saying yesterday....
The real energy "bottleneck" attacked!
Barnett
ARTICLE: "Giant New Oil Refinery in India Shows Forces Roiling Industry: Shipping Gasoline to U.S. Pays, And Overseas Demand Is on a Sharp Upswing," by Steve LeVine and Patrick Barta, Wall Street Journal, 29 August 2006, p. A1.
The most profound tightness in the market right now is midstream (refining) rather than upstream (production, which inevitably ramps up in response to rising prices) or downstream (although the demand pressure here will only ramp up thanks to Asia's growing thirst).
America refuses to drill or build any new refineries (along with our long moratorium on nukes) and then wonders why its energy markets are so tight.
Not too surprisingly, relief comes from a New Core power looking to cash in: India, for example. A billionaire in India is building the world's largest refinery, and when he's done, he plans to send 40% of its flow 9k miles to the U.S.
So watch Western oil companies turn to foreign spots for such investments in coming years. Why? The profit margin in the midstream processing is just so amazingly high right now (thus the most tension there). It used to be you made almost nothing on refining, so you kept such facilities close to consumers to reduce the transport cost. Now, with Asia's rising demand pressuring prices, that logic no longer holds and refineries will be built anywhere to service everywhere (sounds familiar, does it not, like IBM chief Palmisano's description of a 'globally integrated enterprise"?).
New Core pillars will jump into this fray, but so too will ambitious Middle Eastern pillars like Saudi Arabia, moving it downstream somewhat but not nearly as much as empire-building Russia (which wants to run your gas station too).
Still, all this connectivity is good stuff, reflecting the oil industry's increasing sophistication as a global market with significant fluidity--no pun intended. Compare to gas, which still revolves around pipelines (for now), and you realize that our images of the oil industry from the 1970s (so wonderfully dated in "Syriana") are out of synch with the emerging reality imposed by globalization's rapid advance around the planet.
thomaspmbarnett.com |
