Blogs - Blogs
May 10, 2007



EDITORIAL: Supply And Demagogues

Posted 5/9/2007
Charles Schumer wants to investigate gas prices. Look in the mirror, Chuck. The definition of insanity is doing the same thing over and over and expecting a different result. That's the Democrats' energy policy.
Considering that nothing much has changed on the supply side while demand continues to increase worldwide, it would be a mystery if gas prices did not reach record heights — especially in the face of continued boutique fuel mandates, NIMBY refinery bans, greenie restrictions on domestic energy development, etc.
On Monday, gas prices surged to a nationwide record average of $3.07 per gallon, according to the Lundberg Survey, breaking the previous record of $3.03. Sen. Schumer, like most Democrats, thinks it's the oil companies' fault. "The looming question is, are they putting money into maintenance and keeping up refineries as they should?" Schumer asked.
Our refineries are doing more than ever, but their numbers are dwindling and no new ones are being built. The reason is not greed, but cost and regulations. From 1994 to 2003, the refining industry spent $47.4 billion, not to build new refineries, but to bring existing ones into compliance with ever new and stringent environmental rules. That's where those allegedly excessive profits go.
In 2006, the blending of ethanol into gasoline reached a new high of more than five billion gallons and production if new clean-burning ultra low-sulfur diesel fuel topped a record 2.6 million barrels a day at the end of last year.
The fact is that U.S. refining capacity has been growing at about 1% a year for the past decade — the equivalent of adding a mid-size refinery every year. Since 1996, U.S. refiners have expanded capacity by more than 2 million barrels a day. This is a remarkable achievement in the face of environmental mandates setting new ethanol usage and low-sulfur requirements.
But the last major refinery built in the U.S. was in Garyville, La., in 1976 and the ones we have are getting older, no matter how well they're maintained. Fifty out of 194 refineries were shut down from 1990 to 2004. There is no slack in the system. Like the cars they fuel, periodic maintenance us required.
At least we build new cars.
Earlier this year, AAA of Northern California reported a 45-cent-a-gallon jump in price at the pump in one month. But gasoline production in California was off 6% for the week ended March 2 as refineries shut down for the very maintenance Schumer demands.
Lundberg cites at least a dozen additional partial shutdowns in the U.S. and internationally that have cut refining capacity. One of the nation's largest refineries, a BP plant in Indiana that processes more than 400,000 barrels of oil daily, will not be operating at full capacity for several months for unexpected repairs.
Schumer has asked the Government Accountability Office to investigate if rising gas prices are the result of oil company malfeasance or even a conspiracy. Last year, he wrote a letter to ask the Federal Trade Commission to investigate. In its response, the FTC said two previous investigations into unfair business practices by the oil industry found no evidence of wrongdoing.
But there's plenty of wrongdoing in the Senate, which has done nothing to increase domestic energy supplies or refining capacity. In 2005, Sen. James Inhofe introduced the Gas PRICE Act, which would have streamlined permitting procedures, reduced boutique fuel mandates and offered closed U.S. military bases as sites for new refineries. Where was Sen. Schumer's support?
The only thing we we'd like to hear from Sen. Schumer is just where in New York state he'd like a new refinery to be built and what incentives he is prepared to offer.
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