In an era of higher fuel prices, does the Trainer refinery owned by Delta represent a potential asset or liability?
What are the pros/cons?
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Re: Delta refinery question
My understanding is that it is a net positive; even it it does not itself make much (or any) money. Key to that is when you are a refiner that you can enter oil product contracts with other refiners on a refinery cost scale; which is less cost than non-refining companies pay for product when they buy it from refineries. Thus, in general Delta has reduced nationwide its cost of jet fuel (perhaps only a little on a gallon or kg basis). But, the overall reduction in jet fuel cost nationwide more than makes up for any non-profit (if not modest loss) of the Trainer Refinery.
Overall, in my opinion it was a very smart move by Delta. Other airlines cannot easily duplicate it is is a rare occurrence when an old refinery gets sold off for essentially scrap prices (keep in mind that the environmental cleanup cost of a refinery site to even "brownfield" status is huge); and the savings are not worth buying or building a more modern and economically running refinery. Someday in the far future Delta may have to pay this... but, they can milk the Trainer advantage for many decades before that time comes (and perhaps they will update it over the years as well and it will still be running a hundred years in the future).
Have a great day,
Overall, in my opinion it was a very smart move by Delta. Other airlines cannot easily duplicate it is is a rare occurrence when an old refinery gets sold off for essentially scrap prices (keep in mind that the environmental cleanup cost of a refinery site to even "brownfield" status is huge); and the savings are not worth buying or building a more modern and economically running refinery. Someday in the far future Delta may have to pay this... but, they can milk the Trainer advantage for many decades before that time comes (and perhaps they will update it over the years as well and it will still be running a hundred years in the future).
Have a great day,
Re: Delta refinery question
Refineries make their money on the crack spread. The cost of fuel itself is more a trivial matter.
Good news for refiners is that the crack spread has been widening, so they will earn more on each barrel worked.
Crack Spread: A “Quick-and-Dirty” Indicator of Refining Profitability
https://stillwaterassociates.com/crack- ... itability/
Good news for refiners is that the crack spread has been widening, so they will earn more on each barrel worked.
Crack Spread: A “Quick-and-Dirty” Indicator of Refining Profitability
https://stillwaterassociates.com/crack- ... itability/
Re: Delta refinery question
LAXintl wrote:Refineries make their money on the crack spread. The cost of fuel itself is more a trivial matter.
Good news for refiners is that the crack spread has been widening, so they will earn more on each barrel worked.
Crack Spread: A “Quick-and-Dirty” Indicator of Refining Profitability
https://stillwaterassociates.com/crack- ... itability/
Yep and DL is doing it, literally, right in AA's Back Yard.
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