Been wondering why you’re paying $3.00 a gallon — or more — lately? The main reason, according to Jad Mouawad of the New York Times, is because there’s a bottleneck in US refining capacity, which means that the least little disruption causes higher prices:
There have been blazes at refineries in Louisiana, Texas, Indiana and California, some of them caused by lightning strikes. Plants have suffered power losses that disrupted operations; a mid-size refinery in Kansas was flooded by torrential rains last month.
American refiners are running approximately 5 percent below their normal levels at this time of the year.
”You have a system that is taxed to the limit,” said Adam Robinson, an energy research analyst at Lehman Brothers. ”This is what happens when spare capacity is eroded.”
Ah, but why is that spare capacity eroded? We find out one key reason in the very next paragraph:
After Hurricanes Katrina and Rita disrupted the nation’s energy lifeline almost two years ago, oil companies delayed maintenance on many of their plants to make up for lost supplies and take advantage of the high prices. But, analysts say, they are now paying a price for deferring repairs.
Oh, but we’re not supposed to blame the oil companies’ greed for any of this:
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.
”Every refinery would like to run as much crude as possible, but they simply can’t,” said David Greely, senior energy economist at Goldman Sachs, who in a recent report compared the drop in domestic refining to an ”invisible hurricane.”
Oh, really? Then how do you explain this piece of news, from earlier this year:
Chevron exec: Ethanol means no new refineries
Investment doesn’t make sense, despite U.S. need to import gasoline
WASHINGTON – A top Chevron Corp. executive said Tuesday the push to displace as much as a fifth of the country’s gasoline with ethanol will make it less likely the industry will build new domestic refineries.
“We’ll take all the ethanol that corn growers produce. We’ll use that enthusiastically” as a 10-percent blend with gasoline, Peter J. Robertson, Chevron’s vice chairman, said in an interview with The Associated Press.
But Robertson, the No. 2 executive at the country’s second largest oil company after Exxon, said he questions whether a goal of a 20-percent reduction in gasoline use, largely by substituting ethanol, can be achieved by 2017 as President Bush has urged.
When asked if the company might invest in a new U.S. refinery, Robertson had a quick answer:
“Why would I invest in a refinery when you’re trying to make 20 percent of the gasoline supply ethanol?”
And it’s not just Chevron’s Robertson saying this, either. Here’s an article from just last month:
Only last year, the Energy Department was told that refiners, reaping big profits and anticipating growing demand, were looking at boosting their refining capacity by more than 1.6 million barrels a day, a roughly 10 percent increase. That would be enough to produce an additional 37 million gallons of gasoline daily.
But oil companies already have scaled those expansion plans back by nearly 40 percent. More cancellations are expected if Congress passes legislation now before the Senate calling for 15 billion gallons of ethanol use by 2015 and more than double that by 2022, say industry and government officials.
“These (expansion) decisions are being revisited in boardrooms across the refining sector,” said Charlie Drevna, executive vice president of the National Petrochemical and Refiners Association.
With the anticipated growth in biofuels, “you’re getting down to needing little or no additional gasoline production” above what is being made today, said Joanne Shore, an analyst for the government’s Energy Information Administration.
And of course, those of us with memories that go back at least six years remember all too well the similar-sounding excuses used to explain why so many power plants were taken offline back in 2000 and 2001, and why energy costs were shooting through the roof even though demand was not, as Dick Cheney’s buddies at Enron and other companies were busy raping the state of California and other places foolish enough to deregulate their public utilities.