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Delta buys oil refinery - aws future option?

Started by knutm1980, May 01, 2012, 08:52:38 AM

knutm1980

http://uk.reuters.com/article/2012/05/01/uk-delta-idUKBRE84002T20120501

Making savings of $300 million a year. Should we move this  to feature requests?  ;)

libertyairlines

I think that it it is a great idea to add it to the game as well as make it available to sell fuel to other airlines (if that is possible, or "sell" the amount of fuel your airline doesn't use to one of the AI fuel suppliers).

brique

All the majors got hit badly during the recent fuel-price upheavals, with most suffering large hedging losses when they mis-judged the post-financial crisis prices. So, on the surface, it looks like a smart move to secure your fuel supplies a bit further up the production pipeline.

But Delta will probably regret this particular move : when even the oil companies, who should have a pretty good idea of the ups and downs of refinery ownership, don't want these sites (one of two slated for closure), then buyers beware.

Plus they cant just set it to only produce jet fuel : refining crude oil doesn't work that way, so they will have to trade-off other products, perhaps in swap-deals with other refiners/distributors ; and there's the rub, the plant isn't competitive already, so they'll probably be trading that production at a loss just to get the stuff out the gate.

They'll be out-sourcing running the place, sourcing crude and distribution to the usual industry suspects who will be on cost-plus deals ; so reckon on them making their profits and Delta covering the losses until they close it down in 3 years time.

dmoose42

Fairly pessimistic view and although I think there's a lot of benefit to vertically integrated operations, I have to agree that I struggle to see the synergies with the core airline business given the different expertise required out of a refinery operation and the limited pricing power.  Plus, the crack spreads aren't typically that great so I suspect that this will only be a marginal benefit to them in an ideal scenario.  I suspect it is more of a distraction play to demonstrate a change in startegy that the lemmings will buy into.

chiveicrook

From what I've heard they are selling other refining byproducts in exchange for a discount on jet fuel from BP(which also sells them crude oil) outside US. Might be an interesting venture... if I had any stock portfolio I'd get some Delta shares :-)