Date published: 2005/09/17
The BBC says:
Sir Richard Branson plans to hold talks with the government about paying for a new oil refinery.
The Virgin Atlantic boss told the BBC he wanted to reduce his airline fuel bill, which has increased by £300m a year over the last two years.
He said there was an "enormous shortage" of oil refineries and said he was looking at building one.
...
Sir Richard said oil refineries were "very expensive" adding: "This is not something I particularly want to do."But, he said: "At the moment there's an enormous shortage of refineries in the world.
"Every one of the refineries is at capacity, the oil companies are not building new refineries, and we have put a team on trying to raise money to build at least one."
The fuel bill for Virgin Atlantic and Virgin Express was in the region of £750 million a year, he said.
"If we could just bring that fuel bill down by just a tiny amount that would make a big difference to us and our customers.
"If we can encourage governments to confront this issue, if we can get western governments together to work out how to deal with the issue, we think we can make a real difference."
Sir Richard said it would take at least four years to build a refinery and he was also looking at ways to find oil.
Governments should aim to build 10 refineries as soon as possible to counterbalance oil companies and the oil cartel, Opec, which kept prices high, he said.
"Opec is effectively an illegal cartel that can meet happily, nobody takes them to court," he said. "They collude to keep prices high.
"The western world should have a counterbalance to that. If $20 billion was put aside to build 10 new refineries, oil prices would start to collapse again.
"The oil companies realise that and they are not getting out there investing the money to build those refineries.
"In a sense, as free marketeers why should they? But governments should intervene to make sure that happens."
A "two-pronged" government attack was needed to tackle the problem, he said.
"If they intervene in the short term and do something too radical to stop growth, we will have an incredible recession."
Governments should encourage companies to buy fuel efficient planes and trains and give tax breaks to companies which produced fuel efficient hybrid cars, he added.
It would be better to tax "fuel-inefficient" airlines than to tax all airlines for the fuel they used, he said.
You have to admire Richard Branson for at least considering this issue, which politicians seem to be ignoring. But it's truly bizarre that someone who runs a couple of minor transport companies is being forced to consider building a refinery, because of the lack of political leadership.
Of course airlines, like all other consumers of energy, should be taxed on the amount of energy they use (the rate being set by some combination of general tax requirements plus the purported cost of dealing with the associated environmental damage). How much energy you use determines whether or not you are "fuel efficient". And the calculation for all businesses is not as simple as just buying more fuel efficient equipment to replace less efficient older equipment because there is a huge capital investment in existing equipment (and money equals energy, so throwing away equipment is not only throwing away money, it is throwing away energy). Needless to say all businesses do an analysis to try and figure out whether and when it makes more sense to buy new equipment or continue to use old equipment. (The analysis might turn out to be incorrect, but that is another matter.)
_________________________________________________________
All material not included from other sources is copyright cambridge2000.com.
For further information or questions email: info [at] cambridge2000 [dot] com
(replace "[at]" with "@" and "[dot]" with ".").