Let me introduce you to my friend, Karl Miller. Karl Miller is a US energy-sector figure known primarily as a trader, investor, and distressed-asset specialist rather than a sell-side or think-tank “analyst” in the narrow sense. Per his own professional materials and a Risk.net profile: his career began on Wall Street in 1989 at Dean Witter Reynolds, then moved into futures and options trading at Copia in New York; he later worked in the energy arm of Électricité de France (EDF) and became a partner at NEAH Energy (sometimes styled NEAH Power/Global Energy).
Karl has played a key role in educating me about the complexity of the oil industry and he had some comments on my last article. So here is his take:
Ultimately, I think your strongest point—that refinery configuration constrains the world’s ability to absorb the loss of Gulf heavy sour crude—is well supported. The weaker point is the implication that the United States somehow stands outside those constraints. In reality, the U.S. Gulf Coast is better positioned than most regions to weather such a shock because it possesses world-class deep-conversion refining capacity and access to diversified heavy crude supplies. Those advantages make it more resilient than many of its competitors, but they do not exempt it from the economic realities of an integrated global commodity market.
In a major disruption, the challenge facing Gulf Coast refiners would not be an inability to process heavy sour crude. It would be the escalating cost of acquiring the heavy sour crude upon which that refining system depends.
The engineering is correct.
The economics are considerably more complicated.