[Steve Okula]

I have heard from some golf course superintendents in the USA recently, saying that the recent spike in fuel prices is having an adverse affect on their maintenance operations.

If fuel prices continue to rise, what affect will this have on maintenance practices and future architecture?

Normally, it is the mowing that consumes the most fuel. Will fairways shrink? Be maintained at higher cuts? Less water and fertilizer?

I don't know. But while I'm on the subject, and knowing that there are one or two brilliant minds at work here, I pose the following question; Why are there not more oil refineries in the world?
 
I keep hearing that the problem of gasoline shortages in the US and elsewhere is not that there is too little crude, but a bottle neck at the refining and delivery end, and that there hasn't been a new refinery opened in the US since 1985.

The most profitable organization in the world today is ExxonMobile ($23 billion in 2004), followed closely by Chevron, BP, and Royal Dutch Shell, et al. Surely the lack of refinery facilities is not for any lack of funds.

Why then, don't these omnipotent financial behemoths simply build more production?

Does anyone have a clue?

[Geoffrey Childs]

Steve

Lets put the next one in your neighborhood.  

Environmental problems and local opposition make it a permiting nightmare. There was a report on the radio today  that mentioned it would be about 5 years before one could be built if they wanted to start the process today.

I wonder why not expand the ones we already have.

[Darren_Kilfara]

I have nothing intelligent to contribute to this topic, but I have to ask...is this the shortest subject header in GolfClubAtlas.com history?

[Steven_Biehl]

Aside from the direct influence of increased oil prices on the cost of operating equipment, oil is also used to manufacture fertilizers.  The main product used to manufacture nitrogen fertilizers is ammonia, which is produced be combining nitrogen extracted from the air with hydrogen from hydrocarbons such as natural gas.  Oil is also used in the production of pesticides, although it is a much smaller percentage of the cost of production vs. fertilizers.

[Steve Okula]

Steve

Environmental problems and local opposition make it a permiting nightmare. There was a report on the radio today  that mentioned it would be about 5 years before one could be built if they wanted to start the process today.

I understand that the permitting is complicated, but it's hard to believe that in 20 years with unlimited funds in a country the size of the US that nobody could pull it off.

[David_Elvins]

Steve,

Another factor on the increase cost of maintenance but more relevant to golf course construction is the use of petroleum  in producing PVC.  Anyone doing drainage work will have a significant increase in costs.  

As for the increase demand for fuel.  As I understand it, the biggest increase in demand (and the biggest effect on the price) has come from China.  Wouldn't be too hard to build a refinery there, regulations wise.  But I am not sure what motivation the oil companies have, thier profits are skyrocketing at the moment!  But I really don't know much.  Tim Weiman would probably be the man (or one of the men) to give a knowledgable opinion on this topic.

[Mike Benham]

The most profitable organization in the world today is ExxonMobile ($23 billion in 2004), followed closely by Chevron, BP, and Royal Dutch Shell, et al. Surely the lack of refinery facilities is not for any lack of funds.

Go back to your Econ books, supply and demand ... why increase refinery output when you can control the price through production.  

And depending on the entity, and how vertical their operation is, why even bother refining it if you still can maintain the profit margins by selling/shipping crude to China et al.

The other concept is to have invested in this oil industry during this time period.  With your returns, you could afford 91 octance and full service by now ..

[Bill_McBride]

Many people subscribe to the "Peak Oil" theory, which says the production of oil has passed its peak, there will be progressively less production in the future, and therefore the demand for each successive barrel will be greater than the supply and the price must continue to escalate.  Cheery, huh? And of course increased oil costs increase golf maintenance costs, both in fuel for machinery and cost of fertilizer, etc.  This combined with the "Peak Oil" theory doesn't paint a pretty picture for the future of green fees and member dues.  

[peter_p]

Bill,
You forgot that the remaining oil will be more costly to retrieve. Everything will be more costly because of the price of oil, not just golf course maintenance.

Frequency of mowing, whether greens, fairways or rough will be less. You may see staff hired later in the spring and let go earlier in the fall.
Trees may be cut down as a source of energy  

[Jim Thompson]

Trees may be cut down as a source of energy  

We can only hope!

[Bill_McBride]

Peter, you're right, increased demand for a decreasing supply of a progressively more expensive-to-extract commodity = an ugly future for our kids.  Those hybrids look better all the time!

[Steve Lang]

 
In case anyone is really interested..

Almost all nitrogen fertilizers produced in the world start from a natural gas feed.. not oil.. it takes about 27,000-33,000 cubic feet of natural gas to make a ton of ammonia.  There are very few non-gas ammonia plants.  The ammonia process makes carbon dioxide as a co-product and ammonia is combined with carbon dioxide to make urea, the excess CO2 released to atmosphere.  Ammonia is burned to make nitric acid, which is then neutralized with ammonia to make ammonium nitrate.  Urea and ammonium nitrate can be sold as neat or blended solutions or made into solids.  Same with phosphorus and potassium compounds, though these materials are typically made into solids for distribution.  The classic nitrogenous fertilizer solutions used on crops vary from 28-32% nitrogen.  A lot of solid prilled or granulated urea ends up in NPK (nitrogen-phosphorus-potassium) formulations and with herbicides etc. in materials spread on lawns and commerically like on golf courses.

The last USA grass roots refinery was built in Bell Chase,  Lousisiana, down river from New Orleans, by Gulf Oil back in 1974, last i knew in the mid 80's it could make ~5$ a barrel processed versus old 1940-1960's vintage refineries making 1-2$ per barrel..

The world replacement cost of a modern 200,000 barrel per day refinery is ~$4-5000/barrel or ~$1,000,000,000+.. NOT EXACTLY POCKET CHANGE..  Recent profits notwithstanding, such investments don't really convert quickly into a refinery, because it takes 1-2 years to plan a new refinery design to properly fit logistics for a site, 2 years to engineer and procure equipment.. It takes 1-2 years to secure environmental permits in the US for a major project like a refinery or chemcial plant expansion..

Back in the early 80's shale oil projects ran out of momentum when it was rationailized that they needed 35$/barrel.. the folks in northern Alberta have gigantic amounts of crude equivalent in their tar sands, but again the investments are also huge and it takes real time to do something from idea to product..

Too bad these supply problems can't be solved in a hour, like a TV program.. perhaps that's the real issue at play, no proper recognition of how much work and vision really goes into making things happen..  even when one has foresight.. ya need to keep your eye on the ball and maintain focus for a long time.. sound familiar?

[Wayne_Kozun]

8)The world replacement cost of a modern 200,000 barrel per day refinery is ~$4-5000/barrel or ~$1,000,000,000+.. NOT EXACTLY POCKET CHANGE..  Recent profits notwithstanding, such investments don't really convert quickly into a refinery, because it takes 1-2 years to plan a new refinery design to properly fit logistics for a site, 2 years to engineer and procure equipment.. It takes 1-2 years to secure environmental permits in the US for a major project like a refinery or chemcial plant expansion..

The other problem is that the reifnery business has been very unprofitable for a long time.  Because of this it has been possible to buy an existing refinery for about 50%-75% of the cost of building a new refinery.  Therefore why build?  It is just in the last year or so that refinery margins have increased to where it may make economic sense to build one.  Valero (NYSE:VLO) is a stock that is one of the most pure plays in refineries.   It has gone up from about $20 to $120 in the last two years but before that its stock price languished for a long time - its stock price was approximately flat from 1983-2000 according to this chart.

[Doug Siebert]

Can't maintenance equipment like mowers run on electric motors instead of gas?  Many golf carts do.  Seems to me its quite likely oil prices will continue to rise, so putting solar panels on the roofs of those maintenance buildings to generate electricity (using a net metering arrangement with the utility) would be perfect for powering those fleets of carts and mowers.  Doesn't help for fertilizers, but I seem to remember that certain waste substances produced on farms are usable for those purpose.  And the USGA can continue to work on newer strains that need less of that stuff anyway.

I think we've got many things that are a lot bigger to worry about if oil prices are $200/barrel in 10 years than what will happen to golf course maintenance costs!

[Wayne_Kozun]

Can't maintenance equipment like mowers run on electric motors instead of gas?  Many golf carts do.  Seems to me its quite likely oil prices will continue to rise, so putting solar panels on the roofs of those maintenance buildings to generate electricity (using a net metering arrangement with the utility) would be perfect for powering those fleets of carts and mowers.

The problem is that solar panels aren't very efficient and don't generate much electricity.  Therefore you would need electircity from the grid which would come from electricity generating stations fueled by coal, oil or natgas, all of which have gone up substantially in price.

The spike in prices of oil/natgas has made alternative sources more of an option than in the past as the price differential is coming down, but we still have a long way to go.  And what if there is no sun for a few days - do you post a sign saying: Sorry, the greens are stimping at 4 today because there hasn't been enough sunshine to recharge our mowers.[/i]

[Brent Hutto]

In most climates, solar panels on the roof are a net money loser compared to buying electricity off the regular grid. If it were not so, you would see solar panels everywhere there's some sunshine. Instead, you see them in remote locations where there is no commercial power grid available or the cost of running the wires would be prohibative.

The biggest problem is that per watt a reasonably efficient photovoltaic array is very expensive. So it takes a long, long time to pay off the acquisition cost. And they don't last forever, either. Heck, the energy used in creating the materials for the solar cells is equal to that produced over a considerable period of time (I think it's many months in typical environments but I no longer have reference materials available so don't quote me on that).

TANSTAAFL.

[Brent Hutto]

I think we've got many things that are a lot bigger to worry about if oil prices are $200/barrel in 10 years than what will happen to golf course maintenance costs!

Well before the cost of oil reaches $200/barrel we will be using oil substitutes for many applications where petroleum products are currently cheapest. Substitution on political, warfare or natural disaster timeframes is very difficult. Substitution on a timeframe of decades is pretty much automatic absent political intervention to prevent normal market action.

[Forrest Richardson]

It is not only having a great impact on maintenance, but also building. PVC pipe for irrigation is skyrocketing. There is also a worldwide shortage of Portland cement — this is having a great effect on construction in general. For resort and daily fee courses with cart paths, GCA-ers who loathe cart paths will take great comfort in learing that cart paths — typically $400,000 U.S. per course — are likely to see a 50% increase.

Perhaps fewer cart paths?

[Daryl "Turboe" Boe]

Back in the early 80's shale oil projects ran out of momentum when it was rationailized that they needed 35$/barrel.. the folks in northern Alberta have gigantic amounts of crude equivalent in their tar sands, but again the investments are also huge and it takes real time to do something from idea to product..

Are the Oil Sands companies not going like gangbusters right now?   I assumed they would be booming right now with the oil prices where they are today.   I did some work up there with Syncrude and Suncor the two big players up in the Alberta Oil Sands region back in the early 90's.  And they were still plugging along, but I have thought about them quite often over the last year or so, I just assumed that they would be booming since the cost is so far over that magic $35/barrel price that everyone used to talk about.

To tie this back to Golf, on one of my trips up there to Ft. McMurry, ALB (go ahead find it on the map straight north of Edmonton quite a ways).  I got off the plane at about 10pm and it was still daylight.  I asked someone when it got dark there during this time of year and was told about 1am.   So I inquired about where the closest golf course was and teed off at about 11pm and got in a quick nine.  

[TEPaul]

With record profit margins of the major oil companies---with no refinery built in 20-30 years, with environmentalists constantly fighting the expansion of oil refining does it seem to you these people really hate each other at every turn?  

Even Mother Nature has been getting into the cabal, as Hollywood stars and ultra rich professional athletes weep over the destruction in the Gulf Coast as they continue to buy and drive their $125,000 customized Hummers that drink gas like there's no tomorrow.

The price of oil sure has effected our maintenance budget tihs year as we expect it too in the future. And all this as I sit down to write a memo for the green committee to remind our board that the last phase of our restoration project needs to be scheduled. The last phase of our restoration project is fairway expansion.  

Last year we were asked to cut our course operating budget some but we convinced them to take it out of so-called "penal areas". If they ask for another budget cut I'll lobby to take any additional cut out of so-called "penal areas" AGAIN. If gas goes to $5.00 I'll lobby to sell the sand pros and I'll lobby that maintenance no longer maintain the bunkers. We'll lobby that only members and caddies can rake the bunkers. Maybe we'll even tell the members to bring their own weed-eaters over to the club any time they come to play.  

[Ian Andrew]

Steve,

Why then, don't these omnipotent financial behemoths simply build more production?

Does anyone have a clue?

I read an article recently that talked about the razor thin margins in this business, add in the average of 7 years to get one approved and on line; why would they bother? There are better investments available for them.

If every SUV was a Prius tomorrow, you would have an oil glut. It's actually that simple.

[astavrides]

After 2 or 3 three years,  solar panels have produced more energy than it took to create them.  Solar panels typically come with a 20 year warranty and last much longer than that.

The price per watt will fall as government subsidies increase to allow manufacturers to grow and economies of scale to take effect.  Also, the budget for solar research (which would lead to higher efficiencies and lower costs) in this country is only about 50 million per year, much smaller IMO than what it should be.  

If you take into account the true costs of fossil fuels in terms of subsidies to those industries, global warming and other envirionmental costs, and wars and aid to corrupt oil producing regimes, solar energy doesnt seem so expensive anymore.  

Solar energy cant account for 100% of energy needs, but it can account for an increasingly large fraction of it.  The sooner, the better.

In most climates, solar panels on the roof are a net money loser compared to buying electricity off the regular grid. If it were not so, you would see solar panels everywhere there's some sunshine. Instead, you see them in remote locations where there is no commercial power grid available or the cost of running the wires would be prohibative.

The biggest problem is that per watt a reasonably efficient photovoltaic array is very expensive. So it takes a long, long time to pay off the acquisition cost. And they don't last forever, either. Heck, the energy used in creating the materials for the solar cells is equal to that produced over a considerable period of time (I think it's many months in typical environments but I no longer have reference materials available so don't quote me on that).

TANSTAAFL.

[igrowgrass]

In 1978 the price of an barrel of Oil was $14.  The combination of the Iranian Revolution, the Iraq/Iran War, and the threat of communism spreading throughout the West caused the price of a barrel of Oil to rise to $35.
In 2001 the price of a barrel was just below $23.  With the events that have occured around the world and sense of uncertainty over many situations the price now sits at $62.95/barrel.  
I was definetly not old enough to remember any of this.  I was wondering if people who were old enough during that time, does the world seem to you anything like it was when oil prices were out of control in 1981?

[Steve Lang]

 

hate to say i remember gas for 22 cents a gallon.. i sound like my dad talking about cheap baby ruth candy bars..

did you know the largest use of solar energy is heating swimming pools?  its certainly good for low grade energy demand..

In the aftermath of Hurricane Katrina, one of the more common investment cunundrums is that Americans now know they need new refineries, but they aren't going to ditch their expensive SUVs and buy Kia's very much to reduce gas demand (40+ %)... so the demand side of things (oil and refined products) is going to stay high.. especialy with competing international demands from China and India.. who is going to make money?.. the oil companies or firms building new refineries or the folks transporting the fuel and speculating on its value..

Have you heard of the Arizona Clean Fuels project in Yuma which has been trying to build a new refinery for six years, and not a single shovel of dirt has moved. The company is still fighting its way through city, county, state, and federal permit procedures.  remember in 2003,.. when a major gasoline pipeline ruptured in Arizona and was shut down for two weeks, causing price spikes and shortages throughout the state and region?  Partly because of this event, Arizona Clean Fuels Yuma claims that there is 90% public support for a new refinery. Yet it is proving exceptionally difficult for the group to obtain approval for "the most advanced fuel refinery in North America ... producing the cleanest burning gasoline, diesel, and jet fuel that can be produced in the United States today."

If the cleanest refinery in North America cannot be built in a remote location, with 90% public support, then what are the prospects in the rest of the country?  The Arizona refinery struggle exemplifies why some believe high fuel prices are here to stay for several years, it simply takes a long time to bring new refining capacity to market.  

I'm involved in some new refinery work that won't come to fruition till 2010 or so..  first one to market will win..  the Valeros and ConocoPhillips of the world will continue to scoop up the old refining capacity to grow.. like in the hotel business, swapping their locations to re-depreciate costs, but it will probably be foreign refineries being built first... with products landing here, not raw oil..

like in houston this past week, if you had it, it was worth gold if you didn't, you just hunkered down and prepared for the worse the best you could..

[Steve Okula]

Maybe then, the answer is wind power.

Erect some of those giant, electricity-generating windmills to charge the electric greensmowers. They (the windmills) could  be incorporated into the golf course design, like large-scale putt-putt.

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