Monday, October 28, 2013

Tough thoughts on Grangemouth - A reality check.

Grangemouth refinery is not a strategic asset of consequence and the petrochemical facility even less so. If refineries in Britain can be run profitably fine - let them do so. If not, finel as well. The products of an oil refinery are commodities that are plentifully available from a wide variety of sources. A refinery converts crude oil into these products at an operational and environmental cost. If the refiner's margin (the difference between the cost of the crude + processing and the realised value of the manufactured products) is positive then fine. Keep on refining. If, for whatever reason, it isn't then stop and buy the refined products on the open market.

One of the reasons the refiner's margin might not be positive is because the operating costs are too high. Too many staff paid collectively too much for example. Another might be if the environmental costs as a result of local or national laws are too high. It might sound harsh (it is) but however good the workforce and excellent the facility if it costs too much producing undifferentiated commodities then it is not viable. 


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