06/22/05 — Gas prices: No new refineries in almost 30 years

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Gas prices: No new refineries in almost 30 years

Prices are influenced to a significant degree by supply and demand. Or so we have been led to believe over the years.

If hurricanes decimate the orange orchards in Florida, expect to pay more at the grocery store. Droughts in the mid continent can cause higher prices for grain products.

Gasoline prices can jump noticeably during peak travel periods. And understandably, gas prices are affected by crude oil production and prices.

With gasoline prices above $2 a gallon for months now, there has been a clamor for more oil production at home.

But then comes the word that the problem isn’t the availability — or lack of it — of crude oil. It is the inadequacy of our refineries.

While gas consumption soars every year in this and other industrialized countries, not a single new refinery has been built in the United States in almost 30 years. It isn’t just a problem at home. Worldwide, the need for refined oil is increasing at twice the rate of processing capacity.

Why has the U.S. not increased the number and capacity of refineries since 1976? Perhaps the public — or vocal segments of it — can be partly to blame. Refineries — like oil drilling operations — are frowned upon by environmental purists. And there are strict environmental regulations. Compounding the problem is low return on investments from the private sector.

With no relief in sight, perhaps our government should give attention to increasing the capacity of refining crude oil in this country or urging the building of refineries in some other countries — friendly places in need of an economic shot in the arm.

Could we not encourage private investment with tax breaks and other considerations?

If refineries are the problem, it would seem obvious that this is where we need to focus to find at least part of the solution.

But another question must occur to many as they fill their tanks with gas at well over $2 per gallon: Is there really a shortage of gas? While the prices are high — and climbing — the suppliers obviously have plenty of it. There are no lines and no “sold out” signs. 

Published in Editorials on June 22, 2005 11:15 AM