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Virgin's Branson wants oil refinery

Think you are upset about high gas prices? Maverick British entrepreneur Richard Branson is so furious he wants to build his own oil refinery.
/ Source: Reuters

Think you are upset about high gas prices? Maverick British entrepreneur Richard Branson is so furious he wants to build his own oil refinery.

Like the rest of the airline industry, Branson's Virgin Atlantic Airways has been stung by higher jet fuel prices and was forced to raise fuel surcharges for the second time in four months. Hurricane Katrina sent fuel prices soaring further because it shut several U.S. Gulf Coast refineries, which turn crude oil into products like diesel, gasoline and jet fuel.

"If we don't start now to get more refineries built then fuel prices could literally rocket to $100-$200 (per barrel of oil) and the world economy would come to a grinding halt," Branson said in an interview on financial news network CNBC Tuesday,

Branson did not say where he wants to put his refinery, but some analysts said he should not look to the United States, where no one has built a refinery in 29 years.

"My immediate reaction to that is: Not in the U.S.," said Paul Flemming, oil analyst at Energy Security Analysis Inc. "That's definitely more pie in the sky than anything."

In the United States, getting a permit could involve years of navigating local, state, and federal regulations and protests from environmental and community groups, analysts say.

But they note that people in other places would not be too keen to have an oil refinery in their backyards.

"If you're talking about a 400,000 barrels per day refinery next to a French Chateau in the Loire valley, the timeline is infinite," said Tim Evans, senior oil market analyst at IFR Energy Services. "If you're looking at an industrialized part that already includes an oil refinery, it's much less of a big deal."

It's about time ...
Branson said plenty of places would welcome the jobs that a new refinery would create, adding "Some people will kick and scream, but they may be the same people screaming about the fact that they're having to pay enormous prices every time they get into the car."

But building a refinery to ease high fuel prices would be far from a quick fix: any refinery would take at least four or five years to build, if not longer.

And according to Energy Security Analysis' Flemming, another refinery would not ease record high crude oil prices as Branson suggests, since it would not increase actual crude oil production.

Branson's idea does have some fans, however, among those concerned about the lack of competition in the refining industry, which is dominated by a few large companies.

"The oil companies themselves aren't interested in building new refineries and will tend to denigrate the chances of any new investors actually succeeding in their business," said Evans of IFR Energy Services. "They'll say, 'What does Richard Branson know about oil refineries?' He doesn't have to know about that part of the business, but he can easily see that oil refiners are making a margin far superior to what he's making in the airline business."