After A Year of Struggle, Valero Shutters Delaware Refinery

Valero (VLO) announced today that

“…it intends to permanently shut down its Delaware City refinery due to financial losses caused by very poor economic conditions, significant capital spending requirements and high operating costs.”

The company tried to avoid this shutdown for a year:

“‘The decision to permanently close the Delaware City refinery was a very difficult one,’ said Valero Chairman and CEO Bill Klesse. ‘We have spent the last year diligently trying to avoid this situation, and I have worked closely with Gov. Markell in an effort to find a different outcome. Earlier this fall, we shut down the gasifier and coking operations in an attempt to improve reliability and financial performance, but the refinery’s profitability did not improve enough. Additionally, we have sought a buyer for the refinery, but feasible opportunities have not materialized. At this point, we have exhausted all viable options.'”

While this action may signal lower gasoline prices in the short-term, the long-term implications could be very inflationary. Capacity destruction in energy and commodities typically sets the stage for future inflation. It was just a few years ago when refiners struggled to keep up with the demand for gasoline and the angst then was that America had not built a new oil refinery since around 1976! As the population continues to grow, as more trucks and cars hit the road, and gasoline demand begins to surge again, gasoline prices may surprise significantly to the upside, at least in the Northeast.


One Comment on “After A Year of Struggle, Valero Shutters Delaware Refinery”

  1. SepireTiews says:

    I highly enjoyed reading this blogpost, keep up writing such exciting articles.

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