Saturday, July 21, 2007

Refinery Problems Hike Cost of Gas

The many regulations put up by the Department of Energy, EPA, FARC, and other US government agencies, as well as state and local enforcement rules & guidance, has caused new refineries and refinery expansion in the US to come to a complete standstill. This has true for three decades, ever since Jimmy Carter inserted meddlesome government regs with the applause of his Democratic House & Senate.
The New York Times has an article showing that the time has come for the reaping of what big intrusive government has sown: a total obsolescence of our refining capacity & a block on new drilling in offshore and ANWR acreage that is very prospective. Even the NYT deflects the loons who claim that this is a corporate conspiracy:
Some critics of the industry have theorized on Internet blogs that the squeeze on gasoline and other refined products points to a deliberate effort among oil companies to bolster profits by keeping supplies tight. But experts point out that the companies have little incentive right now to hold back on fuel supplies.

The NYT displays its usual unnewsworthy sense of news by ignoring a large petition in Chicago designed to block the expansion of the big BP/Amoco refinery in nearby Indiana:
In late March, for example, a fire at a large compressor at a BP refinery in Whiting, Ind., caused a hydrogen-treating unit that removes sulfur from some oil products to shut. That meant BP had to turn off a crude oil unit for early maintenance. Two weeks later, a brief power disruption damaged another distillation tower. And in July, a third crude oil tower was shut briefly so operators could fix a small leak. Since the first incident, the 405,000 barrels-a-day refinery has been running at about half its capacity.

Mayor Daley was waving his own petition begging Chicagoans to try to override an EPA exemption granted July 9th allowing BP/Amoco to expand, upgrade and retrofit its facilities while updating some of its procedures. Even the NYT, though it neglects to mention the political brouhaha, does point out the irony:
No refineries have been built in the United States in over three decades, because refiners say they are too costly. Instead, they have been expanding their existing refineries. All this is happening as the industry goes through another golden age. After 20 years in the doldrums, the refining business has never been so good for oil companies. Refining margins — the difference between the price of crude oil and the value of refined gasoline made from it — have shot up as much as $25 a barrel for some types of crude oil, compared with about $5 a barrel just a few years ago. But with a third summer of high gasoline prices, lawmakers are debating legislation they claim would punish oil companies for exploiting the tight supply situation and engaging in "price gouging." At the same time, they are pressing refiners to produce more fuel.

"Refiners want to keep running in today’s economic environment," said Mr. Drevna of the refiners association. "But when they shut down they are accused of gouging the system. When they don’t, they are criticized for overrunning their facilities."

Of course, Congress has only one crude instrument for handling complex economic situations, and as the adage has it, when you only own a hammer, every problem looks like a nail."

A takeover by Democrats in '08 would prolong and deepen the gas price crisis, although a sensible candidate like Bill Richardson, who comes from an oil state [yes, NM is an oil state] & was Secretary of Energy, might have the political smarts and sophistication to surmount temptatons to take the blunt-instrument approach the left wing normally applies to energy problems.

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