Delta Air Lines Buys an Oil Refinery

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


Matt Yglesias brings to my attention this morning a deal announced by Delta Air Lines to buy its very own jet fuel refining plant. Here’s the explanation from Delta’s CEO:

While Delta will remain hostage to fluctuating crude oil costs, the facility would enable it to save on the cost of refining a barrel of jet fuel, which is currently more than $2 billion a year for Delta and has been rising in the wake of U.S. refinery shutdowns, said Delta Chief Executive Richard Anderson. “What we’re tackling here today is the jet crack spread, which you cannot hedge in the marketplace effectively,” Anderson told reporters during a phone briefing. “It’s the fastest single growing cost in our book of expense at Delta.”

OK, so Delta thinks refinery profit margins are too high, and they don’t feel like making refinery owners rich at their expense. But then there’s this later in the article:

The refinery is expected to resume operations in the third quarter, Delta said, about a year after ConocoPhillips idled the plant as rising imported crude oil costs, a collapse in demand and tough competition from foreign refiners crushed margins.

This makes sense. After all, why would ConocoPhillips shut down the plant if it were making windfall profits?

Matt paints this acquisition as a failure of the financial industry, which ought to be able to help Delta hedge the cost of jet fuel more efficiently. Maybe so. But I’m just flat confused. If a collapse in demand and tough competition from foreign refiners has crushed profit margins, then what is Delta complaining about? It sounds like it’s a buyer’s market for jet fuel these days. And what on earth makes Delta think that it can run a refinery more efficiently than someone who’s fighting tooth and nail for business in the free market? If they can really do that, it’s not a failure of Wall Street, it’s a failure of capitalism. This whole deal sounds crazy. Maybe ConocoPhillips should have bought Delta instead. 

KEEP MOTHER JONES CHARGING HARD

You're busy, so we'll keep this short: We need to raise $325,000 over the next month to help fund the hard-hitting, fiercely independent reporting you get from us. It's a pivotal moment for our democracy, accountability, and so much more—but you already know that, you just read a Mother Jones article. If you can right now, please consider supporting our work with a donation so we're ready for the hard work ahead.

payment methods

KEEP MOTHER JONES CHARGING HARD

You're busy, so we'll keep this short: We need to raise $325,000 over the next month to help fund the hard-hitting, fiercely independent reporting you get from us. It's a pivotal moment for our democracy, accountability, and so much more—but you already know that, you just read a Mother Jones article. If you can right now, please consider supporting our work with a donation so we're ready for the hard work ahead.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate