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Saturday, December 26, 2009

Hyperion Won't Happen, Now or After Recession

AP offers yet another story about American oil refineries scaling back and closing. Does anyone still believe Hyperion's bluff that they're going to build an expensive new refinery here in South Dakota?

But wait: maybe it's just the recession causing a temporary dip in petro-demand. Once President Obama fixes the economy, we'll need more gasoline than ever, right?

Just a few years ago, gas was $4 a gallon and there were worries the nation did not have enough refining capacity. But the recession, coupled with more emphasis on fuel efficiency, has driven down demand as refineries were built and were expanded in China, India and the Middle East.

[Caris & Co. analyst Anne] Kohler said gasoline demand isn't likely to return to its 2007 peak and even if the economy turns around, refineries that are shuttered will probably stay closed, partly because it's so hard to reopen one once it's closed entirely [Geoff Mulvihill, "Refinery Struggles Bruise NJ Communities," AP via ABCNews.com, 2009.12.25].

No return to the 2007 peak. Sounds to me like the experts in the industry are saying oil refining is a dead-end investment.

Now those refineries have been offering great wages—$33 to $37 an hour, according to Mulvihill's report. I'd love to see Hyperion bring wages like that to Elk Point, but the oil industry sees wages like that as liabilities. Hyperion might bring a refinery here to take advantage of relatively cheaper labor—their own press promises average wages of $20 to $30 an hour, and you should always round company propaganda down. But the industry in general sees they can get even cheaper labor overseas and then ship the final product back to America.

Hm... can't export wind power jobs, can you?

Even the Sioux City Journal blog acknowledges that Hyperion would have to prove itself an exception to the market rules to make the Elk Point refinery a reality. I know folks in Elk Point need jobs, but Union County would do better to invest in achievable local industry rather than the pipe dreams of a company with no proven record and all the market fundamentals stacked against it.

1 comment:

  1. i do wish you could send such convincing articles to the rest of South Dakota. People tend to listen to what is said from newspapers, whereas radical bastards such as me have to rely on people like you reading my blogs. i have been saying for almost 3 years that this is a hoax. a land grab is more of a possibility than an oil refinery.


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