Sep-23
2005
Why No New US Oil Refineries in 29 Years?
Topic: Politics 2005
Sharing headlines with hurricanes Katrina and Rita has been coverage of the United States’ limited and fragile oil refining capacity. We’ve seen gas prices soar not because of a lack of oil shipments to the US, but because the hurricanes have shut down refineries crucial to turning that oil into gasoline. The conventional wisdom that’s quickly emerged on the news channels is that we wouldn’t be in this situation if it weren’t for environmental regulations, and pressure from environmental groups, raising too many obstacles to the construction of new refineries. Is this the only reason, or is there more to the story?
Congress is already gearing up to loosen environmental regulations and “streamline” the approval process (i.e. block objections from local communities) for the construction of new refineries:
Congress got an earful from industry officials who argued for tax breaks to bolster capacity and complained that environmental regulations and ‘not in my backyard’ citizen movements had blocked efforts to build new refineries…Both parties are weighing measures to loosen environmental and permitting constraints for refineries.
As the saying goes, don’t believe the hype. While environmental regulations and NIMBY-ism are certainly a factor, of equal or greater importance is the fact that until now the industry hasn’t been particularly interested in building new refineries:
“Oil companies want to make money with refineries, and they did not want to get excess capacity by over-investing,” says Lehi German, president of Fundamental Petroleum Trends, a weekly newsletter. Oil companies felt that if America suddenly needed more gasoline or diesel fuel, “then import it.”
So the industry has placed profits ahead of investing in refining capacity, and – with the exception of this Christian Science Monitor article I quoted – the media seems content to go along with them pining the whole thing on environmentalists.
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