Quote:
Originally Posted by vintagetoppsguy
Some good comments about the Upstream part of the oil business, but what about the Downstream (refining) part of it? No matter the cost of oil, it still has to be refined to gasoline and other by products.
So, what happens when the cost of refining exceeds the cost of oil? Do you think the refineries would keep their doors open only to lose money? After all, plant operators/staff are paid pretty well.
I don't know the cost of refining, but I do know that no company in the world is going to stay in business long when their cost of production exceeds the cost of the end product.
IMO, that's where we're heading with oil if it continues to decline. The refineries would shut down (just temporarily) creating a gasoline shortage and there would be mass panic when people can't buy gasoline to get back and forth to work. Seem far fetched? Just look what happens after a hurricane or other disaster when people can't gasoline or supplies.
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Not too far fetched in my opinion but it will take time for that to occur. i'm worried about what happens in the nearer term 6-12 months out. Don't let today fool you be careful out there.