|SThe role of refinery capacity in explaining
price behavior in 2004 may have been overstated by some analysts in
2004. The world still has some extra
|SWhile the refining situation in 2004 was
not dire, refinery capacity is an issue for the future since demand is
outpacing refining expansion.
|SHowever, market analysts should beware of
over-simplifications that indicate additional barrels of heavy crude oil
cannot be used or won't help the market due to some mismatch with refining. The presentation tried to illustrate that
the role of conversion capacity versus distillation capacity in meeting
demand is complex when feedstocks are also taken into account.
|SIt is clear that new capacity worldwide
will be needed, and "what" capacity (i.e., conversion,
distillation, etc.) will be worked out by the industry.
|SIt is also clear that the focus should be
on more refining capacity worldwide sooner rather than later. That is, timing is a concern as demand
continues to grow.
|SWithin the United States, the petroleum
product supply dialogue must deal with the rising importance of supply among
the competing concerns of: security (capacity here versus abroad),
environment (NIMBY, fuel specification timing), and supply availability.