question
I don't know that much about this particular issue. An article I read a couple weeks ago somewhere highlighted another factor that could explain why more refineries are not being built, so I thought I would throw this out to see what you oil guys think.
Basically, the thesis of that article was that the truly important variable is the rate at which oil can be extracted from a given field without endangering the field itself. The former chief geologist from Saudi Aramco said this was the case - basically that if you took too much out at once, then the whole thing might collapse for some reason and trap the remaining oil in an unextractable position. Further, he said that there really weren't any technological fixes on the horizon for this. It was just a problem of geological structures.
So the article said that the oil crunch will come not because there isn't enough oil, but because there is a ceiling on the amount of oil that can be extracted annually worldwide without threatening major oil fields, and that demand will soon push up against that ceiling because of global economic growth, creating steady pressure for prices to keep rising in order to bring supply and demand into equilibrium.
If that model is true, then there is a simple economic explanation for why oil companies aren't building refineries. If annual oil production has a ceiling, then you don't want to build refineries that would bring annual oil refining capacity past that ceiling. Or, even if we don't know exactly where that ceiling is, it makes building refineries that much riskier.
Are the assumptions of this argument reasonable?
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