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Delta Buys Oil Refinery

Would you buy a high-cost oil refinery from a major oil company that was about to shut it down? Delta just did. The airline announced yesterday that it is shelling out $150 million for an oil refinery near Philadelphia in a bid to control its enormous fuel bills.

Richard Anderson, Delta’s chief executive officer, issued this statement in a press release from the airline: “This modest investment, the equivalent of the list price of a new widebody aircraft, will allow Delta to reduce its fuel expense by $300 million annually and ensure jet fuel availability in the Northeast.”

This is the first time a U.S. airline has purchased a refinery in order to control fuel costs. I’m not about to second guess Delta’s high-priced consultants and accountants, but I still wonder if this scheme will work. Certainly, whether at the refined or crude level, Delta will still be exposed to the ups and downs of oil world markets.

It’s not likely, however, that Delta will retail any gasoline. So we won’t see Delta stations with signs such as this: “Unleaded regular, $295 a gallon, plus 59¢ a gallon lane occupancy and 49¢ pumping fees.”

Are you surprised that Delta bought a refinery?

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