(TRAINER, Pa.) — Airlines everywhere have been suffering due to high fuel prices. Now Delta Airlines has decided to purchase its own oil refinery from ConocoPhillips — a move the airline says will save around $300 million a year in jet fuel costs.
The deal between Monroe Energy LLC, a Delta subsidiary, and Phillips 66 was announced Monday. As part of the deal, Monroe will receive $30 million from the state of Pennsylvania for creating jobs and improving infrastructure, according to the Atlanta Journal-Constitution.
Gregg Laskowski, a senior petroleum analyst at Gasbuddy.com, says Delta’s purchase makes sense.
“If an airline has the opportunity to try and control its fuel costs, certainly buying a refinery is one way to do it,” Laskowski said.
Delta expects that the jet fuel it will make at the refinery south of Philadelphia, along with a few deals for more, will cover about 80 percent of the fuel it needs for its planes in the U.S.
“If Delta can do that and keep that refinery operating, that’s going to be very good news for consumers,” Laskowski said.
There are currently three refineries in Pennsylvania, two owned by ConocoPhillips. All three refineries represent 700,000 barrels a day of capacity — more than half the East Coast refining capacity. Not only could the deal reduce fuel costs for Delta, it could also save refinery jobs, Laskowski notes, emphasizing the deal’s importance to both the public and private sectors.
“There’s an awful lot at stake here. And that’s probably the reason why there’s all kinds of effort from both the public and private sector to keep this moving,” he said, adding, “The United Steel Workers can tell you there’s hundreds of jobs at stake. They certainly want to see those jobs retained at these refineries without interruption.”
Copyright 2012 ABC News Radio
Paul Menser, BizMojo Idaho
Susan Scutti, CNN