Delta hedges its bet against spike in fuel prices

As part of the transaction, Monroe will enter into strategic sourcing and marketing agreements with BP and Phillips 66
By Patrick Burnson, Executive Editor
May 02, 2012 - LM Editorial

Delta Air Lines wholly-owned subsidiary, Monroe Energy LLC, has reached agreement with Phillips 66 to acquire the Trainer refinery complex south of Philadelphia.

As part of the transaction, Monroe will enter into strategic sourcing and marketing agreements with BP and Phillips 66.  The acquisition includes pipelines and transportation assets that will provide access to the delivery network for jet fuel reaching Delta’s operations throughout the Northeast, including its hubs at LaGuardia and JFK.

“Acquiring the Trainer refinery is an innovative approach to managing our largest expense,” said Richard Anderson, Delta’s chief executive officer. “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 strategy is aligned with the moves we have made to build a stronger airline for our shareholders, employees and customers.”

Derik Andreoli, Ph.D.c. Senior Analyst, with Mercator International LLC, and LM’s energy columnist, noted that Delta will also be a bit sheltered from a price spike should an actual shortage of middle distillates emerge.

“A bad hurricane season could bring on just such a panic. At any rate, Delta will still be paying for oil, but if the price of oil rises more slowly than middle distillates, Delta will make out,” he said. “This is not all that different than playing the spread on the futures market. In both cases Delta benefits from an increase in the price differential between middle distillates and crude.”

After receipt of $30 million in state government assistance for job creation and infrastructure improvement from the Commonwealth of Pennsylvania, Monroe’s investment to acquire the refinery will be $150 million, and Monroe will spend $100 million to convert the existing infrastructure to maximize jet fuel production.  Production at the refinery combined with multi-year agreements to exchange gasoline, diesel, and other refined products from the refinery for jet fuel will provide 80 percent of Delta’s jet fuel needs in the United States.



About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The index ISM uses to measure non-manufacturing growth—known as the NMI—was 56.0 in June, which edged out May by 0.3 percent.

Regardless of the date or year, one thing is beyond consistent when it comes to key themes in freight transportation logistics: the state of United States highways and related transportation infrastructure is in an eternal state of chaos and disrepair.

The high-volume warehouse or distribution center that supports B2B, Omni-channel activities, direct-to-consumer shipments, and the Internet of Things all require a flexible and scalable supply chain in order to function at optimal capacity. The problem is that most of today's supply chains are made up of fragmented silos of information that compromise their ability to compete, be responsive to customer demands or seize new business opportunities.

As customers' demands constantly evolve, transportation and logistics (T&L) operations are being put under growing pressure to offer more efficient delivery services, while not compromising on customer service. Using findings from a research survey conducted among transport and logistics managers around the world, this report explores how a combination of mobile technology implementations for mobile workers, and process re-engineering efforts can elevate operations to the next level.

It's a fact - most best-of-breed WMS providers force you to pay every time you require a system change. Uncover five more dirty secrets many warehouse management systems providers don't want you to know. Download the white paper 5 Dirty Secrets of Warehouse Management Systems to discover these hidden truths and gain valuable information on considerations for evaluating WMS vendors.

Article Topics

News · Air Cargo · Air Freight · Fuel · All topics

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA