Delta Buys Own Oil Refinery

Aims to shave jet fuel costs in unprecedented deal
By Polly Davis Doig,  Newser Staff
Posted May 1, 2012 6:36 AM CDT
This Thursday, April 19, 2012 file photo shows the ConocoPhillips refinery in Trainer, Pa. Delta will buy the refinery as part of a deal that it hopes will cut its jet fuel bill.   (AP Photo/Alex Brandon)
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(Newser) – Delta Air Lines is pocketing a Pennsylvania oil refinery in an industry-first move to clip its ever-burgeoning jet fuel costs, which soared to $12 billion last year. The $150 million deal—about the cost of a new jetliner, notes Reuters—is set to satisfy 80% of the airline's US fuel needs, while simultaneously saving it $300 million a year. Delta will also sink $100 million into upgrades at the idled ConocoPhillips plant in Trainer, Pa., so that it can better refine jet fuel.

While Delta will still twist in the winds of crude prices, the deal allows it to rein in refining costs, which currently run it around $2 billion a year. "It's the fastest single growing cost in our book of expense at Delta," a spokesman says, adding that, "you cannot hedge in the marketplace effectively." Local politicians are applauding the move, which will save 5,000 jobs, but skeptics aren't sure the ploy will pan out. "It's clearly a very innovative approach, but I think it will be a number of years before we know whether it actually works out," says an industry expert.

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