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Markets to nearly twelve billion dollars that's how much Delta Airlines spent on fuel last year or so and an effort to cut its build buying an oil refinery ports self how to -- the deals the first of its kind for a major US airline but with that.
Comes -- serious risk the next guest would know Gary Sick it is principal risk consulting group logical management systems thank you so much for joining us.
What's the upside first so they're gonna spend a hundred million dollars to modify the refinery.
Jet fuel is currently 14% of the production and they're gonna kick that up all the way to 32%.
Make -- that cut out the middleman.
They get I think 80% of their supplied you like this plan.
Yeah I think it's a good plan I think it also reflects the fact that you've seen it since 2000.
-- reduction and refining capacity on the East Coast that substantial.
We were doing almost two million barrels a day in terms or refined products in 2000 they're now doing less than 800000 barrels a day so our refinery operating on the East Coast.
Is going to be a plus and a lot of respects.
Do you still -- but here's the flip side the reason why they can -- refinery is because refiners are going out of business they say they're not actually making any money that the price of oil.
Is going up faster than they -- and raise the price of jet fuel and and other fuels obviously you know gasoline as well.
You know a lot of them on the -- -- ConocoPhillips.
Saying they wanna get out of this business is -- not making a recent -- delta taking a huge risk.
They're too generous but.
Luke this country has reduced its refining capacity on the last.
Forty years or so by a significant amount over 80% we were -- we import refined products.
With that loss of critical infrastructure.
In this country we are the -- suddenly at the mercy if you will of external forces.
Control supply is for refined products so what do you do.
I think it's it's a viable move and I think we just heard T.
Boone Pickens -- -- target about a lack of an energy policy in the Braintree.
I think there's one factor that we need to really consider as we look at Delta's.
Purchase and the potential upside.
The price -- oil goes down suddenly I mean it seems impossible but it did happen I mean when President Obama took office the price of a gallon of gas was a dollar 89.
I was covering energy when it got up 250 -- It taints all the way down to a third of that practice so -- it's possible it's happened before then they'll be stuck holding the back.
No actually in this rigorous back from -- refining standpoint lower priced oil becomes Bob blessing and a lot of respects.
Because journalists -- more and you're able to offset costs in that regard.
You also have to look at them and the refinery itself.
This is -- a high value piece of property it's.
Rated fairly high on a number of scales with regards to.
The output that it can do if they can read -- -- reconfigure and do 32%.
Jet fuel they will have made a substantial -- In this regard -- CEO themselves does said that the price of crude oil can be hedged their financial -- that was one way to do it the price of jet fuel.
Is higher but you know -- they just use hedges instead of buying a refinery.
I think it's probably.
-- Abdul boy in that regard but it's the risk issue of not having supply when you need it can't and I think that they're trying to offset that with physical supply so I think that the issue.
Having physical supplies you can control vs a hedge yeah that you have to work.
Work with mixed a lot more sent.
No Gary sounds like a great idea we're just trying to poke holes that it's we know everything about it -- -- -- and -- us yeah I think everybody is he.
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