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| Europe | |
| US pays less for oil than Europe: policies have consequences | |
| 2005-09-15 | |
| The leading European nations have paid about 10 per cent more than the US for the oil they consumed during the first half of the year as less sophisticated refineries force Europe to import premium high quality oil. Germany, France and the UK paid $47.40 a barrel on average for the oil they consumed between January and June, while the US paid $43.10 a barrel, according to data from the International Energy Agency, the industrial countries oil watchdog. This translates into an additional $4.8bn spent by these three leading European economies on oil imports. Refineries require complex and costly facilities to distill cheap low quality oil, also know as heavy sour crude, into the petroleum products, such as petrol or diesel, that are in greatest demand. These so-called conversion facilities are common in the US, but less abundant in Europe. They represent about 45 per cent of total north Europe refinery capacity, well below the 75 per cent in the US. A large amount of conversion capacity makes it easier for US refineries to handle cheaper oil imports from Venezuela or Mexico, whose output is largely low quality oil. European finance ministers recently urged oil companies operating in Europe to boost ârefinery investmentâ. French Finance Minister Thierry Breton will meet on Friday with oil companies to discuss their investment plans. âSeveral companies haven't invested enough in refining,â Mr Breton said on Wednesday.
Francisco Blanch, senior oil strategist at Merrill Lynch in London, said that the US has invested more in refinery conversion because it is surrounded by low quality oil producers, like Canada. European refineries in contrast have concentrated their investment of recent years in complying with strict new environmental regulations. Narrow differentials between high and low quality oil in the 1900s also discouraged investment in conversion capacity. But with high quality oil, such as that pumped from the North Sea, becoming scarcer, demand for it has pushed up prices, widening the price differential with low quality oil. The differential between the prices paid by the US and Europe, traditionally below $1 a barrel in the late 1980s and 1990s, has jumped to $4.20 a barrel so far this year. Meanwhile, low quality oil, such as that produced in the Middle East, is more abundant and therefore cheaper. Saudi Arabia, Iran and Kuwait have offered recently large discounts on their already low official prices in order to boost demand â suggesting a further widening in the gap later this year. Analyst forecast that high quality oil will be increasingly scarce in the future and new oil fields coming on stream will produce mainly low quality oil. âThe spare production capacity and the new fields coming on stream are, at the best, medium quality. Many of them, are low quality. So we are going to see the differentials widening in the future,â said an official from a large producer of low-quality oil. | |
| Posted by:lotp |
| #3 Eurowhiners have much in common with California eco-regulation, "complying with strict new environmental regulations". |
| Posted by: Captain America 2005-09-15 18:09 |
| #2 I believe $0 is the answer James, and it will bite us in the ass later if we don't get more refineries. |
| Posted by: mmurray821 2005-09-15 13:28 |
| #1 BTW, how much have we been investing in new refineries lately? |
| Posted by: James 2005-09-15 10:49 |