Gas Prices Cannot Be Fixed by Doubling Offshore Drilling Part 1

Today, this very day, if all US Offshore Drilling was doubled, it still would NOT make a difference in gas prices. The bottleneck in processing oil is refinery capacity. We know this because every spring and fall, when refineries shut down to transfer processes and do small maintenance, the gas prices spike. Don't believe me, yet check out the evidence below the fold.

The important point is that Republicans are all about marketing their political agenda to please their corporate clients, not fixing gas price problems for everyday people. Republicans do not care about speaking truth about gas prices or anything else. A Republican gets elected by promising $2 dollar gasoline, and then blaming any convenient target when elected. Just like the pretty girl on every car ad, the Republicans are just as much of a marketing lie. Challenge me on this! And check it out your self. Remember the "lemon" cars that were sold by used car salespeaple, well this lemon-car Republican lie does not even have an engine!

In order to get gas from oil, there has to be enough refinery capacity. We have maxed out our refinery capacity and it take at least four years after all permits are obtained to build a refinery.

Lack of Refinery Capacity Causing Gasoline Crisis Worldwide

The last refinery built in the United States was built clear back in 1976. We now have to import over 10% of our refined gasoline to keep up with the demand in the United States. The United States has been operating consecutively at 90% or higher capacity for our refineries since 1992 and downtime and major disruptions(Hurrican Katrina) to refinery operation have had a crippling effect upon our economy. The World is currently operating close to 90% capacity for refineries. It has been obvious for a long time now that both the World and the United States need to build new refineries. So why haven't new refineries been built? While it is true that environmental opposition and regulations are a major obstacle to building new refineries, it is also true the big Oil Companies know that peak oil will occur within 5 years and fear that excess capacity from new refineries will not be needed for the next 20 years as the World starts switching to alternative fuels. Arizona Clean Fuels LLC has secured most of the permits to build a new refinery in Wellton, Arizona but is having trouble getting the investors to build a $2.5 billion refinery. Additionally, Oil Company profits increase for Refinery operations if the supply of refined gasoline can be limited by not having enough refinery capacity to flood the market with excess refined gasoline. The mergers of Big Oil Companies also has resulted in less competition in the market place for refinery operations. The current trend shows small refinery operations being shut down while large refinery operations expand their refinery capacity. It is more economical to run big refinery plants compared to small refinery plants.

It is estimated that refinery capacity worldwide from 2004 to 2010 will increase from 84.6 million barrels/day to 93.9 million barrels/day. This is an increase in refinery capacity of 9.3 million barrels/day for this time period for the World. Meanwhile demand for crude oil is expected to increase from 82.6 million barrels/day in 2004 to 90.4 million barrels/day projected for 2010. This is an increase in demand of 7.8 million barrels/day.The graph above shows the World will continue to struggle with insufficient refinery capacity with a surplus capacity of 103% for year 2005 and only marginal improvement for year 2010 with a surplus capacity of 103.9%. Surplus capacity plotted above is the ratio of the World refinery capacity to World demand. (James Reed)

I choose this quote because all the logic and facts are stacked up nicely. However, if look elsewhere you can find the same facts piecemeal. The refinery magazines have the same information in a more technical format,

Each spring, just before the summer driving season, gasoline prices skyrocket. And every year, these four words appear in news reports nationwide as a big reason for the runup: "lack of refining capacity."
(Money)

Even Bush says we have a lack of refinery capacity!Quoting rom a Bush speech:

"Finally, we need to expand and enhance our refining capacity. It has been 30 years since a new refinery was built in our Nation."(Fox)

Of course, you can expect that enviromental concerns will be blamed for lack of refinery development. Remember in those discussions, that refineries could been built in foreign countries that currently allow toxic dumping. So from the start, you know this is a fake argument.

Myths and Facts about Oil Refineries in the United States

The Bush administration and some members of Congress blame environmental rules for causing strains on refining capacity, prompting shortages and driving up prices. But in reality, it is uncompetitive actions by a handful of companies with large control over our nation’s gas markets that is directly causing these high prices.

Myth 1: Oil refineries are not being built in the U.S. because environmental regulations, particularly the Clean Air Act, are so bureaucratic and burdensome that refiners cannot get permits.

Fact: Environmental regulations are not preventing new refineries from being built in the U.S. From 1975 to 2000, the U.S. Environmental Protection Agency (EPA) received only one permit request for a new refinery. And in March, EPA approved Arizona Clean Fuels’ application for an air permit for a proposed refinery in Arizona. In addition, oil companies are regularly applying for – and receiving – permits to modify and expand their existing refineries.[1]

Myth 2: The U.S. oil refinery market is competitive.

Fact: Actually, industry consolidation is limiting competition in oil refining sector. The largest five oil refiners in the United States (ExxonMobil, ConocoPhillips, BP, Valero and Royal Dutch Shell) now control over half (56.3%) of domestic oil refinery capacity; the top ten refiners control 83%. Only ten years ago, these top five oil companies only controlled about one-third (34.5%) of domestic refinery capacity; the top ten controlled 55.6%. This dramatic increase in the control of just the top five companies makes it easier for oil companies to manipulate gasoline supplies by intentionally withholding supplies in order to drive up prices. Indeed, the U.S. Federal Trade Commission (FTC) concluded in March 2001 that oil companies had intentionally withheld supplies of gasoline from the market as a tactic to drive up prices—all as a “profit-maximizing strategy.” A May 2004 U.S. Governmental Accountability Office (GAO) report also found that mergers in the oil industry directly led to higher prices—and this report did not even include the large mergers after the year 2000, such as ChevronTexaco and ConocoPhillips. Yet, just one week after Hurricane Katrina, the FTC approved yet another merger of refinery giants—Valero Energy and Premcor—giving Valero 13% of the national market share. These actions, while costing consumers billions of dollars in overcharges, have not been challenged by the U.S. government.

Myth 3: The United States has maxed out its oil refining capability.

Fact: Oil companies have exploited their strong market position to intentionally restrict refining capacity by driving smaller, independent refiners out of business. A congressional investigation uncovered internal memos written by the major oil companies operating in the U.S. discussing their successful strategies to maximize profits by forcing independent refineries out of business, resulting in tighter refinery capacity. From 1995-2002, 97% of the more than 920,000 barrels of oil per day of capacity that have been shut down were owned and operated by smaller, independent refiners. Were this capacity to be in operation today, refiners could use it to better meet today’s reformulated gasoline blend needs.

Profit margins for oil refiners have been at record highs. In 1999, for every gallon of gasoline refined from crude oil, U.S. oil refiners made a profit of 22.8 cents. By 2004, the profits jumped 80% to 40.8 cents per gallon of gasoline refined. Between 2001 and mid-2005, the combined profits for the biggest five refiners was $228 billion.

Gutting environmental laws for oil refinery siting will not solve the high gas prices.
(Public Citizen)

The last related Republican lie is that if business made more profits, we would have more business development, more US jobs and lower prices. The oil business is making record high profits. Oil and business in general has been consolidating to make more money. As business gets more consolidation and power, we get less product and higher prices This oil industry experience is the same as the history of the Standard Oil Monopoly experience. It demonstrates that unregulated uncontrolled business is bad for prices and the common good in every way. Big profits result and ordinary people suffer!

It would help if you knew that I speak so authoritively about peak oil problems because I worked 11 years at Chevron, including the technical support of financil planning. Every projection was saying that in 2007, that gas demand would overcome gas supply, therefore causing gas prices to soar. That is called "peak oil". Basically $4/gallon gas prices are here to stay. Don't let the pain of that cause you to buy a political lie. We as everyday ordinary people would not be in such bad shape if Republicans had not maintained that cheap gas was here forever, So really put blame where it belongs - on Republican lies.