# Delta Airlines buys an oil refinery



## afigg (May 1, 2012)

Delta Airlines has brought an oil refinery near Philadelphia to produce jet fuel for their own use. NY Times article on the purchase. Interesting and risky strategy to insure a supply of jet fuel and at a lower cost. Delta is an airline, companies usually don't do very well when they acquire a completely different kind of business.

I think it says that Delta realizes that it could become difficult in a few years to buy jet fuel on the open market so they want to insure a supply. Well, so long as they can get light crude suitable for the refinery.

What the NY Times article does not go into, but there are numerous other news articles that do, is that many east coast refineries have shut down or are at risk of closing because they were not designed to handle the heavy, sour crude that is much of the oil on the market today. The refineries are also hindered by overcapacity with the US using less gasoline, So Delta has the opportunity to buy a recently closed refinery at a discount.


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## amtrakwolverine (May 2, 2012)

Want us to use more gas LOWER THE PRICE.


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## Trogdor (May 2, 2012)

amtrakwolverine said:


> Want us to use more gas LOWER THE PRICE.


I'm not sure who wants anyone to use more gasoline, nor do I really understand why such should be a goal.


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## Ryan (May 2, 2012)

The oil companies, I guess.

Didn't Amtrak try something along the NEC, owning some electrical generation capacity? How did that work out?


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## jis (May 2, 2012)

Ryan said:


> The oil companies, I guess.
> 
> Didn't Amtrak try something along the NEC, owning some electrical generation capacity? How did that work out?


Not really. What Amtrak tried to do was get itself declared as a power providing company and thus get lower rates on bulk purchase or some such, and they were told that even they do deliver power to customers, they are not a power company. I am sure PRR can give a more complete and accurate account of what happened.

I am sure the oil companies don;t particularly care how much gasoline is purchased as long as their bottom line keeps growing at respectable rates. That could happen due to their ability to charge higher unit price or by being able to sell more at a lower price. It is all yield management for them too. Generally when crude prices are higher, mysteriously the oil companies' profits also soar.


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## Green Maned Lion (May 2, 2012)

The soaring profit is the result of the false profits generated by LIFO inventory models. If profits were recalculated using NIFO, or inventory replacement costs, you'd find, In all likelihood, decreasing profits when the value of oil goes up.

If I have an item I paid $5 for, sell at Keystone $10, and the cost goes up to $8, and I absorb some for my customers and sell at $12, LIFO says I made $7. But the reality is the money I can take out for paying myself, my shareholders, or reinvesting in growth is $4. My usable profit has gone down $1. My margin has gone down from 50% to 33%, and my business performance is sharply down- even though the numbers suggest my profit has gone up 40%.


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