Posted on 09/06/2005 9:23:20 AM PDT by .cnI redruM
With oil and gas production in gulf states at a standstill in the wake of devastating Hurricane Katrina, oil prices hitting a record $70 per barrel, and an average gasoline price of over $2.60 a gallon, the Bush administration has decided to tap the nation's Strategic Petroleum Reserve.
The move comes amid numerous predictions that gas prices will shoot up over $3 per gallon throughout California this Labor Day weekend. Bloomberg News reports that Katrina forced the temporary closure of at least eight refineries, responsible for as much as 10 percent of the nation's oil production.
The ongoing fallout from Katrina sheds light on our woeful energy policies, demonstrating that we are so vulnerable that even a temporary shutdown of oil refineries in one corner of the country will have a huge impact on gasoline prices across the country and in California.
Why? Supply and demand. And not simply the supply of oil we get from the Middle East, Venezuela, and others.
A new oil refinery has not been built in the United States since 1976. During that time, our gasoline use has increased over 25 percent. The nation's 149 existing refineries have been running at maximum capacity trying to meet record demand and, as a result, not only do we import oil, we actually have to import 10 percent of our daily gasoline from refineries overseas.
So when Hurricane Katrina or a refinery fire or anything else causes even just a few refineries to shut down for awhile, there is absolutely no excess capacity nationwide to make up the difference, and prices at the pump skyrocket.
For the wealthiest, most powerful nation in the world this is a ridiculous situation that will only get worse as our insatiable demand for gasoline keeps growing and refinery capacity falls further behind in the coming years.
Just a few new refineries would alleviate the problem and help keep our gas prices lower and steadier.
But getting an oil refinery built is next to impossible, hence the 30-year construction drought. There will always be environmental activists who fight any new proposed refinery, regardless of where it might be located and how environmentally safe it is. And our environmental rules give them the upper hand.
The environmental impact-report process mobilizes the "not in my back yard" elements to oppose any proposed refinery, but it does not mobilize people or groups who are looking at national energy needs. You wind up with a very lopsided discussion where potential problems are thoroughly and perhaps overly represented, but the only group pointing out the benefits of the refinery is the "evil" oil company asking to build it - even though every automobile driver would benefit.
Consider the example of Arizona Clean Fuels, which has been trying to build a small refinery outside Yuma for almost 10 years. It took five years just to get air-quality permits. Now they hope to be operational in 2010, 15 years after they started the project.
President Bush recently signed a new energy bill that tries to make it easier to build new oil refineries, especially in areas with high unemployment – where the new jobs would likely be welcome. And yet, special-interest groups decried the provision as an environmental and public health injustice, arguing that these communities won't want refineries but won't have the political power to fight them off.
The opposition to building new refineries ignores the dramatic technological improvements that have been made since an oil refinery was last constructed here in 1976. New, clean refineries emit far less pollution than older refineries, with new scrubbers and design changes that dramatically reduce sulfur and other emissions. And at the same time our ability to model and map emission characteristics and distribution lets us choose the best locations for new facilities – where they will have the least possible impact on people and the environment.
Even as gas prices have soared beyond $2.50 per gallon in many parts of the country, Americans have not stopped driving. We might tighten our budgets elsewhere to make up for the added expenses, but we show no signs of giving up our cars. At some point, we need to admit our dependence on gasoline and add the capacity and refineries that will help lower gas prices.
Our environmental review process needs to embrace local concerns and impacts, but it can't facilitate the "not in my back yard" resistance that completely derails plans for any new refineries.
Hurricane Katrina has revealed an ominous weakness in our energy policy. If we don't start building refineries and adding capacity to handle our growing gas needs, it won't take a natural disaster to send gas prices soaring even higher.
Second of all, if we were a smart enough nation to realize that supply-side economics worked well with currency, why are we too stupid to attempt the same measures with commodities such as gasoline?
more importantly, why are we posting 5 day old news as if the price of oil isn't continuing to decline?
why are we too stupid to attempt the same measures with commodities such as gasoline?
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Simple. Because that is not the way the oil companies want it. And those companies make very substantial campaign contributions of BOTH SIDES of the aisle.
How can a journalist possibly be talking about gas wells in one paragraph and then gasoline prices in the next but call gasoline gas?
Go Nuclear...!
WTOP is the DC local 24/7 radio news program. Not having cable TV they are pretty much the only dose of liberal indoctrination I get. Last Friday night I almost swerved off the road listening to an "Economic expert" out of George Mason. He said the solution was to build more refineries and hit the touching points a few of us have been screaming about here at FR. WTOP even let him go as far as to mention that a reduction in gas taxes (federal or state) will only exacerbate the problem and gave a quick supply and demand lesson! (insert comment about stopped clocks here)
There you go! Mr. George understands that price controls only invite hoarding and shortage. I respect the DC libs for allowing him speak his piece.
This is a very good point. The oil companies may not want to look like they are siding with the environmentalists and NIMBY crowd but it serves their purposes to keep a comodity scarce and limit competition. Then it is interesting that the very leftists that oppose new refineries are compelled to hate the oil companies who wind up making huge windfall proffits during times of scaricity. The leftists who understand capitalism (and I am sure they are few and far between) must be going nuts when they see how easily their policies can be "used" against them.
Of course their solution is to invoke total government controls. But allowing more refineries would better create the competition that will drop the prices for everyone. This will lead to growth and population increases, again things the left does not want to see, because these new groups have jobs and won't be beholden to the left.
The refineries I've seen are mega-sized.
Is there any type of refinery that is medium or small designed to service a much smaller area?
Just a guess...
;^)
''Bloomberg News reports that Katrina forced the temporary closure of at least eight refineries, responsible for as much as 10 percent of the nation's oil production.''
Boyohboy, dose must be dem new refineries, yuknow, dose ones dat pump de crude AND refine it.
Who IS this loon? Sheesh.
Good point. It almost seems that the media is soo afraid of a public backlast against inadequate oil supply infrustructure that they are scrambling to "control the message".
Which means that the only ways to get the reserve refinery capacity we need would be to encourage new companies to enter the refinery marketplace or to create a "strategic refinery reserve" similar to the SPR.
The Bush administration over the past five years has been limp-wristed at best in its advocacy of such concepts.
Because said 'journalist' is an idiot
Ding! ding! ding! ding! We have a winner!
Took the words out of my mouth!
I disagree with that assesment so do several others....
more here: http://exposingtheleft.blogspot.com/2005/09/forbes-predicts-oil-will-drop-to-35.html
"Which means that the only ways to get the reserve refinery capacity we need would be to encourage new companies to enter the refinery marketplace or to create a "strategic refinery reserve" similar to the SPR."
1) Build a company to pull in all the investors drooling at the new biolfuels potential market all across America.
2) Pull in 50 billion dollars from said investors to build 7 new biofuels refineries in the Midwest, powered by two nuclear power plants to fuel the conversion of plant matter to biofuels.
3) Sell biofuel to Exxon and other major US oil companies that have national distrubution to the local retailers.
4) Begin exporting biofuel product to other countries and reap massive windfalls of profit.
I am simplifying a business model but one that is going to be done by someone very soon I am sure.
I believe simply removing some environmental restrictions and requirements would allow new refineries to enter the clearly profitable business at this time.
If that is what you meant by "encouraging new companies to enter the refinery marketplace" then we are on the same page.
However, your comment about the Bush administration being "limp wristed" is curious. Has the Bush administration been attempting to push an energy bill through congress since his initial election? Or do you mean Bush has not pushed congress hard enough? There is opposition to his policies, maybe the opposition will vacate a little now that Katrina has shown how vulnerable we are. I suspect Bush will take full advantage of the rising prices as a result of this storm, and we will see new energy plants, refineries, drilling in Alaska, and even the dreaded nuclear power generation plants. I for one am looking forward to this. And the resultant growth that these initiatives will bring.
There is a small refinery here in Fairbanks, North Pole actually. It has been there a couple of decades and provides fuel to several company-owned service stations as well as the International Airport for the big intercontinental freighters. The refinery has changed hands several times including just before the current price run-up.
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