Delta seeks oil connection

  • Article by: JIM SPENCER , Star Tribune
  • Updated: September 6, 2012 - 9:10 PM

The airline is looking at a plan to draw on North Dakota crude - at a possible savings.

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roymercerSep. 6, 12 9:55 PM

Airlines would be smart to do vertical integration of their energy supply chain. Own and operate a couple wells and a refinery or two and all their problems are solved.

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LiberalOne46Sep. 7, 1212:06 AM

This makes no sense at all. The equivalent would be McDonalds buying pasture land...not old cows. Delta makes money flying people, not drilling or refining oil. No doubt they will drill and deliver oil behind schedule and be obnoxious while doing it.

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AirForceGuySep. 7, 12 1:12 AM

"Airlines would be smart to do vertical integration of their energy supply chain. Own and operate a couple wells and a refinery or two and all their problems are solved." ---- Or, what's even a better idea is to put oil wells out of business altogether by developing renewable energy. European aircraft manufacturer Airbus is already looking into solar powered airplanes that require no fuel whatsoever other than solar radiation. Anyone who advocates perpetuating oil is living in the early 20th century. That era is OVER.

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ruphinaSep. 7, 12 1:51 AM

No- biofuels cost more? But our armed forces are all making moves to switch to biofuels, so it must be cheaper, since we all know everyone in government is striving mightily to cut costs and save the taxpayers money, right? Bill G.

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jcinmnSep. 7, 12 5:24 AM

LiberalOne46 "This makes no sense at all. The equivalent would be McDonalds buying pasture land...not old cows. Delta makes money flying people, not drilling or refining oil. No doubt they will drill and deliver oil behind schedule and be obnoxious while doing it." It made no sense at all before the buy-it-on-margin speculators entered the futures field. These people who never take possession of the oil buy exorbitant amounts of oil, drive up the price and then sell it to the people who actually use the oil. This is an extreme step but, hopefully, it will keep Delta's costs down in an extremely competitive industry. The last survey of airline profits showed that, on average, the airlines have not made a profit since they started flying people around the country.

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roymercerSep. 7, 12 8:02 AM

McDonald's already owns farms. And Delta does not make money flying, they actually lose a fair amount just flying. And I will pay for anyone reading this to fly on a solar-powered airplane (hint: it won't happen, ever).

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gjacobSep. 7, 12 9:27 AM

"does not make money flying, they actually lose a fair amount just flying" -- They had a net income of $854M last year, about $250M higher than they year before even with fuel cost increasing 30%.

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ecofmnSep. 7, 1210:02 AM

LOL, love reading the comments here. Especially about how the oil era is over and sun powered airplaness. Delta has zero clue to how to refine oil. While it seems like a brilliant idea, there are many things that will determine if it will be a success. While certainly bringing in cheaper crude is a good idea, they will have to spend millions changing equipment to refine it and must be able to sell the other byproducts for a profit. I wish them luck, they are going to need it.

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LiberalOne46Sep. 7, 1210:26 AM

It is so easy to blame speculators for driving up prices, but anyone in the futures market knows that there are two parties on every trade. For every dollar made, there is a potential dollar lost. The security of having a certain outcome makes the trade worthwhile for the losing party.

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gopherdudeSep. 7, 1210:29 AM

The part I don't get is why spend all of the extra money moving North Dakota Oil to a refinery in Pennsylvania? You could not have purchased a refinery in Nebraska, Minnesota or even Wisconsin to cut down significantly on transportation costs? Why not set up a subsidiary and do this stuff quietly, passengers are going to expect a price break if they know the company is paying less for jet fuel than all of there competitors. This whole deal would bug me if I was a shareholder of Delta. So there going to buy spot price in Cushing or try to buy directly in North Dakota, maybe even wells, and divert the oil via rail car to Pennsylvania, what a dumb idea to announce the stratagy directly? That and you still have to pay contract price and take delivery, have a processing facillity and be able to handle it all of which adds cost to the process, plus the rail car service. Don't you think that the speculators are going to bid the price up knowing full well who the competition is trying to buy said North Dakota Oil. Obviously people are going to move in and bid it up knowing they are trying to buy direct. Don't you think the Pipeline owners, the rail car company's BNSF, Union Pacific and Canadian Pacific are all going to jack up transportation rates knowing full well that they plan on moving the oil by rail car. Competition my left ear, they will all raise prices. Seems like they would at least move things by barge and ship during the non-winter months. This whole deal would make more sense if they would have just broke down and built a new refinery in of all places North Dakota.

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