Very good article. Hits on the real issue of refineries.

Again, there's more to the story.

1. Although everything the oil company are saying is actually accurate, it's also deceptive. Refinery production has increased at an average rate of 1 refinery per year, but we are talking about a small refinery. Fuel production has increased since the 1970s when the last refinery was built. However, it by no means or measurement has kept up with, or even attempted to keep up with demand.

2. It really isn't "mismanagement" that's created the problem of shortages. Getting the most profit from the least resources is actually good management.

3. If any spokesman from an entity called the American Petroleum Institute isn't suspect enough, there's 3 points he brings up that taken with a moment's thought is pretty telling.

a) "API economist John Felmy said that whenever the industry tries to add refining capacity, it faces opposition from surrounding communities.:
I can't name too many oil refineries in communities, and in the most enviromentally conscious area of San Francisco, over in Richmond I really haven't heard any peep of opposition to adding capacity other than from the mass-transit-cures-everything greenies. I actually think Richmond itself would welcome the added capacitiy (and added tax reciepts).

b) "Moreover, Felmy questions why the industry would make major, expensive refining expansions when President Bush is calling for a 20 percent reduction in gasoline use by 2017."
A rehash of the same rationale used since the 70s: "Fuel standards are increasing, gas usage will decrease, so there's no need to add refineries". By no means am I drifting into politics on this point, but it doesn't take much to see how mandated fuel economy standards would actually discourage investment in refineries (resulting in bigger profits on less fuel) where as a tax on fuel that actually encourages fuel economy could concievibly drop demand fast enough to drop prices and cut oil companies profit.

c) Finally, "Felmy said several other factors are contributing to the high gas prices. Those include higher crude prices since the start of the year attributed to tensions with Iran and violence in Nigeria; a decline in gasoline imports due to a strike in Europe; strong demand in the United States; and higher prices for ethanol, which is blended with gasoline to make it cleaner burning."
It's true these contribute, but the oil sold in Nigeria that's affected by something happening today won't arrive at the gas pump for at least a month, and probally longer. Yet, anything going on today will result in fuel jetting up tomorrow. Yet something that's resolved today won't show up at the pumps for months if then. And even when it does, it's never proportionate to the raise the event inspired in the 1st place.


Strategic oil reserves aren't the answer. Ben Schreiber's proclimation that "Refining capacity is not the issue" is completely ignoring the problem for what appears to be a political agenda.

When the United States, a country that has the lowest gasoline taxes in the industrialized world finds it's price for gasoline barely lower than another industrialized country (Australia) that has a pretty hefty tax on gas and both places pay the same price for a barrel of oil on the world market, it's pretty apparent isn't just the price of oil or issues with the country it comes from.

Now. Who does that leave?

 

Did you see the article I posted a few days back?
http://www.contracostatimes.com/search/ci_5862022

Tesoro (Golden Eagle), ConcocoPhillips, Valero and Chevron/Texaco are all investing roughly half a billion dollars into making improvements at their eastbay refineries that "will help consumers, bolster fuel supplies, increase reliability -- and harvest profits."

While increased capacity is not specifically mentioned, it does give the impression that Mr. Felmy is talking out of his anus.

 

On a percentage basis, how much has demand increased per year?

 

I'd say roughly 18 to 20% total from 1983 to 2005. I'd have to dig around to find the 1977 to '83 numbers, but it's safe to say it will average lower still than '83.

http://tonto.eia.doe.gov/dnav/pet/hist/a103600001A.htm

 

There's a Shell station [small one] in my neighborhood that has regular for 2.99. The only station in the tri-county area with regular that cheap. All the other stations [including shell] are at the average 3.15 for regular.

 

Even though we had a 1.7 million gallon surplus in gasoline last week, wholesale prices have risen 15 cents in 2 days to $2.44 a gallon. With a national average of $3.11 a gallon today it is expected that we will smash through the all time inflation adjusted high of $3.13 a gallon within a week.

 

Are you trying to pin this on Cheney for shooting someone I don't know about yet, or are you trying to pin this on Hillary for not riding a bicylce to work every morning?



We all know that the oil companies are not raping us, they are simply passing on the costs of raw materials and processing.


OK, I go for Professor Jones in the Balroom with the Candlestick...



Good post Guy. You know where I stand - have for 4 years.

 

SF Station's Going-Out-Of-Business Sale -- $2.99 Gas

http://www.msnbc.msn.com/id/18961080/

Just thought Id post an update to this story.

 

Fewer Gas Stations (less competition) will only lead to higher prices. Considering those corner lot are very valuable I'm surprised there are as many gas stations as there are.

I do like how that gas station owner way of getting his point accross in a very clever manner.