Delta Refinery Q&A

May 1, 2012, 12:35 AM

AP Business Writers

NEW YORK (AP) – Delta Air Lines is buying a refinery from a company being spun off from ConocoPhillips. Delta is seeking to reduce its jet-fuel bill by $300 million a year. Here is a closer look at the deal:

Q: Why is Delta buying the refinery?

A: Fuel is the largest and most volatile expense for airlines. By owning a refinery, Delta is ensuring itself a steady supply of fuel and possibly more control over sudden price swings. The airline’s planes burned through 3.9 billion gallons of fuel last year, costing the airline $11.8 billion _ 36 percent of its operating expenses.

Q: Why is ConocoPhillips selling its refinery?

A: The refinery has struggled to generate profits. The company won’t break out the financial performance for the Trainer, Pa., facility, but in September it said it had been dealing with “severe market pressure for several years.” The company cited weak demand for gasoline and other refined fuels. It also said the refinery had to deal with especially stringent and costly regulations. The Trainer facility also has higher costs: It uses a great percentage of expensive, foreign crudes than Gulf Coast refineries.

Q: If buying a refinery is such a good idea, why hasn’t an airline done it before?

A: Owning a refinery comes with risks. Some oil companies are getting out of the business because it’s notorious for rapid booms and busts. It’s also capital-intensive. Until recently, many airlines didn’t have enough spare cash to buy new airplanes.

Q: How much does Delta think it will save on fuel, and will it pass those savings along to consumers?

A: The airline estimates an annual savings of $300 million. Delta could take some of that savings and lower airfares, but most passengers wouldn’t notice. The airline took in $33.1 billion in airfares last year. Saving $300 million would lower a $400 ticket by about $3.60.

Q: Could this benefit drivers?

A: Yes. If Delta hadn’t bought the refinery, ConocoPhillips would have likely closed it. That would have further reduced supplies along the East Coast. Gas stations would have made up for the difference by buying more gasoline and diesel from far-away refineries in the Gulf Coast and United Kingdom. The longer distances could raise the risk of supply delays and other problems following major storms that disrupt shipping. That could cause price spikes at the pump.

(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

United States News

Demonstrators block traffic protesting the death of Tyre Nichols on January 27, 2023 in Memphis, Te...
Associated Press

Memphis police chief disbands unit responsible in beating of Tyre Nichols

The unit is composed of three teams of about 30 officers and had been inactive since Tyre Nichols' Jan. 7 arrest.
2 days ago
The image from video released on Jan. 27, 2023, by the City of Memphis, shows Tyre Nichols on the g...
Associated Press

Memphis authorities release video in Tyre Nichols’ death

Video showing Memphis officers beating a Black man was made public Friday after they were charged with murder in the death of Tyre Nichols.
3 days ago
Demonstrators stage a rally in front of the White House to celebrate President Joe Biden's plan to ...
Kevin Stone

Lawsuits keeping over 300,000 Arizonans from getting student loan relief

Lawsuits are preventing more than 300,000 Arizonans from having some or all of their student debt dismissed, the Biden administration said Friday.
3 days ago
FILE -  A Goodyear tire sits on display at a tire shop on Feb. 12, 2014, in South Euclid, Ohio. A f...
Associated Press

Arizona lawyer subpoenaed in criminal investigation of Goodyear tires

A federal grand jury in Los Angeles is gathering evidence in a criminal investigation of Goodyear recreational vehicle tires.
4 days ago
Following days of rain, floodwaters cover streets in the Planada community of Merced County, Calif....
Associated Press

Atmospheric rivers in California boost water allocation for cities

Public water agencies in California will be getting more water from the state because of recent heavy rain.
4 days ago
(Brian Munoz/St. Louis Post-Dispatch via AP, File)...
Associated Press

FDA declines to regulate CBD; calls on Congress for fix

The Food and Drug Administration said Thursday there are too many unknowns about CBD products to regulate them as foods or supplements under the agency’s current structure and called on Congress to create new rules for the massive and growing market. The marijuana-derived products have become increasingly popular in lotions, tinctures and foods, while their […]
4 days ago

Sponsored Articles

(Pexels Photo)...

Sports gambling can be fun for adults, but it’s a dangerous game for children

While adults may find that sports gambling is a way to enhance the experience with more than just fandom on the line, it can be a dangerous proposition if children get involved in the activity.
Quantum Fiber

How high-speed fiber internet edges out cable for everyday use

In a world where technology drives so much of our daily lives, a lack of high-speed internet can be a major issue.
Quantum Fiber

Stream 4K and more with powerful, high-speed fiber internet

Picking which streaming services to subscribe to are difficult choices, and there is no room for internet that cannot handle increased demands.
Delta Refinery Q&A