Branson Wants to Build Oil Refinery

Sir Richard Branson, founder of Virgin Records and Virgin Atlantic Airways, pays much more than the rest of the world for energy. Since his airline consumes so much of it, that is only fair. What he says isn’t fair is the lack of refining capacity. He’s so sure that an increase in refining capacity is the key to future success that he’s serious thinking about building his own facility.

The airline industry books profits and losses these days based on the price or oil (or in the case of many airlines, they book merely substantial losses or genuinely huge losses depending on fuel costs). But it isn’t enough to pump more crude out of the Arabian desert. That gunk needs to be refined into useful products like jet fuel, gasoline and dry cleaning fluid. And than means a big chemistry set.

There hasn’t been a new oil refinery in the US in almost 3 decades. They smell, and there’s always some sort of mess they make in the local water supply. So, the “Not-in-my-backyard” argument is a pretty good one. That’s why these beasts have been placed in Louisiana and surrounding regions – places with little industry sacrificed environmental cleanliness for jobs, not a bad trade if one is slowly starving in the bayou.

And with limited capacity to refine crude, there is a limited supply of distillates coming out the other end. Katrina shut down a substantial portion of America’s already limited refining capacity, and the Saudis can pump crude till the camels come home, but it doesn’t fill the gas tank. Sir Richard’s solution is to build his own refinery where there is already some messy chemistry going on – completing it in the next five years.

Is this silly? Not unless oil prices drop to $30 or lower a barrel. Oil companies make quite good money when demand outstrips supply – check the latest 10-Qs on the SEC website for the oil producers. But what does Sir Richard know about running an oil company? What did he know about the airline business? This man created a record company out of his bedroom, and signed some of the most important acts of the 1970s (including the Sex Pistols). Maybe, he’s onto something.

Meanwhile, Delta Air Lines and Northwest Airlines may be just hours away from filing bankruptcy, so he can't do any worse.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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