This is New?

This article asks why aren't more oil refineries being built? Here is the simple answer: If you are it isn't good for profits. We saw this with the California energy crisis. People would ask, "Why would an independent electricity provider take a plant off-line, wouldn't that company be losing money?" Yeah, they'd be losing some money on lost sales. However, if such a closure resulted in a large enough increase in the price then the profits on that firm's remaining generation capacity would more than make up for the losses.

Here is an example with some simple numbers. The demand is 420 MW and there are 5 plants (one company owns two) each with a 100 MW combined cycle gas fired generator. One plant also has a peaker unit (basically a jet engine nailed to the floor for making electricity) for 20 MW (this facility is one of the two owned by one company). Total capacity is 520 MW. Now the way the market would work is that is that the Price Exchange would take bids from the various companies for electricity with the highest bidder necessary to "clear the market" setting the overall price. Now if I owned the company with two plants and the peaker, I'd convienently have one of my 100 MW plants suffer an "unplanned outage". Now to clear the market the Power Exchange will have to take my bid from my peaker unit. Peaker units are notoriously expensive. So now instead of getting say $50/MW for a total revenue of $600 (remember 120 MW); I get $2400 because it costs $200/MW to run the peaker.

Thus you get a quadrupling of the price. Similarly with gasoline refineries. If by closing one refinery I can raise my profits on my remaining refineries to offset the losses I'd be stupid not too shut down one of my refineries. Throw in that nice wonderful barrier to entry caused by NIMBYism, environmental regulations and other things and bingo! No more refineries being built.

Also, today:

Employees are looking at the decision to participate in an employer program and some are deciding not to participate. Part of the reason appears to be the cost. It isn't clear that all of these people are going without coverage and may be obtaining it via other means.

Also, one must remember that for the young and healthy with relatively no assets, participating in a high cost plan is a suckers game given the legal setting in this country. If you are healthy and suffer a catastrophic accident and you don't have insurance you will not be allowed to simply die without any care.1

The article notes that more analysis will be forthcoming. Hopefully there will be more data available of why people elect not to participate in employer plans and what alternative methods if any they use to obtain medical coverage.