Burning Out

By Jamie Murphy

The chimney stacks along the St. Nicolaas beach on Aruba no longer belch smoke into the luminous tropical air. After 60 years of refining more than 6.5 billion bbl. of crude, including 1 out of every 16 bbl. of aircraft fuel used by Allied forces in World War II, Exxon's Lago refinery, once the largest in the world, will shut down this week. The closing marks the end of an era in the world oil industry and spells trouble for the 70-sq.-mi. Caribbean island. The refinery has provided Aruba with more than half its annual income for better than two generations. Writes the Curacao-based Antillen Review: "The chilling truth, that a total economic collapse might well be the country's fate within two years, has at last dawned upon a wide spectrum of the nation's decision makers."

The bleak oil-refinery situation is not limited to Aruba. The Caribbean's eight major refineries are cutting production, and more than 100 U.S. refineries have ceased operating since 1981. Additional closings are expected. Texaco is shutting down its 65,000-bbl.-a-day plant in Lawrenceville, Ill., and a 20,000-bbl.-a-day operation in Amarillo, Texas. Since September, the company has halved the capacity of its Port Arthur, Texas, refinery to 200,000 bbl. a day.

The effects of the closings have been felt most acutely in the Texas Golden Triangle near Beaumont at the heart of the Gulf Coast refining and petrochemical industry. Since 1981 the area has suffered a 30% decrease in its oil-refinery work force--a loss of 4,000 jobs. Employment in the region's petrochemical industry is down 16%, or 1,749 workers. Offshore-services employment is off 69%--2,124 jobs. Says Debbie Brown, executive director of Orange Christian Services, a Gulf Coast community-support organization: "About two years ago, we saw 40 to 50 families a month in need of emergency assistance. Today we have jumped to 40 or 50 a day."

Even as American refineries have been closing, imports of petroleum products into the U.S. have been steadily increasing. The Energy Information Administration, a federal clearinghouse for energy data, reports that imports, including fuel oil, finished gasoline and gasoline-blending components, have risen about 24% during the past four years. The amount of gasoline entering the U.S. market from abroad nearly doubled during that period, to 291,000 bbl. a day in 1984, while imports of oil requiring further processing increased more than 50%, to an average 230,000 bbl. daily.

Part of the reason for the glut of oilrefining capacity was the industry's over-optimistic assessment of world demand for energy products. Total U.S. consumption of petroleum products rose only 4% last year after a five-year decline. In addition, Western refineries face increasing competition from oil- producing countries, which now refine their own crude at home. Between 1984 and 1988, Saudi Arabia, Mexico, Kuwait, Libya and other oil countries will add about 3 million bbl. a day to their refining capacity.

American refineries are launching a battle against the energy imports. Veteran Washington Lobbyist Charles E. Walker represents a group of 15 companies called the Independent Refiners Coalition, which has called for either a quota or a combination of a quota and tariff on gasoline imports. The Reagan Administration appears unlikely to support such measures, but Walker has begun aggressively lobbying Congress. Says he: "America is rapidly replacing its dependency upon imported crude oil for dependency upon foreign gasoline. When our domestic refineries are closed, foreign refiners will be free to dictate gasoline prices to the American consumer."

With reporting by Bernard Diederich/Aruba and John E. Yang/Washington