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MOTORISTS PAY THE PRICE AT THE PUMP
May 4, 2007

Posted by Matthew_Dempsey@epw.senate.gov (4:00pm ET)

MOTORISTS PAY THE PRICE AT THE PUMP
REUTERS: GASOLINE PRICES HIT $3 AS REFINERS STRAIN
 
Reuters reports in their article today, Gasoline prices hit $3 as refiners strain, that companies are “struggling to retool refineries to meet new environmental standards, have faced longer, more extensive maintenance and serious outages, draining gasoline inventories ahead of peak summer demand.” They cite as a reason an issue Senator Inhofe has been raising for years, writing:   “New lower sulfur fuel specifications have forced refiners to increase the complexity of their equipment, making them more prone to outages.”
 
While Chairman, Senator Inhofe not only raised his concerns, but provided sensible solutions. As Chairman, Senator Inhofe conducted a hearing to examine the environmental regulations in the refining industry in 2004.  At that hearing, Senator Inhofe stated:
 
“In this constrained market, we must consider the environmental and the economic. More stringent environmental regulations mean that refiners must make environmental upgrades rather than increase capacity to meet consumer demand. But you don’t just have to take my word for it - the Energy Information Administration concluded that tighter product specifications will result in: Increased likelihood of outages; diminished yields of prime fuels; and additional investment hurdles for small refiners.”
 
The 2004 hearing was one of several to examine the issue which eventually led to Senator Inhofe introducing the Gas Price Act  which would improve and expand domestic refining capacity in the United States. Unfortunately, Senate Democrats rejected this sensible solution, opting instead to offer an alternative that would have essentially socialized gas production in the US by placing the Environmental Protection Agency in charge of designing, building and operating refineries at taxpayer expense. Thankfully, their alternative was defeated.
 
REUTERS
 
GASOLINE PRICES HIT $3 AS REFINERS STRAIN
By Matthew Robinson
 
Fri May 4, 2007
 
NEW YORK (Reuters) - U.S. gasoline prices shot above $3.00 per gallon on Friday, within striking distance of record highs, as the creaking domestic refinery system strained to keep up with rising demand.
 
Average retail gasoline prices in the world's top consumer reached $3.012 a gallon, the AAA travel group said, up more than 30 cents since early April and near the record of $3.057 hit after hurricanes slammed Gulf Coast oil installations in 2005.
 
This year, companies struggling to retool refineries to meet new environmental standards, have faced longer, more extensive maintenance and serious outages, draining gasoline inventories ahead of peak summer demand.
 
"The problem this year is our continuing and increasing inability to refine enough gasoline to meet growing demand," said Geoff Sundstrom of AAA. "I think it is very possible that we will set a new record high price this month."
 
U.S gasoline stocks have dropped by 15 percent in three months, with refineries now running at around 88 percent of capacity, well below the 92 percent analysts say is normal this time of year to build up summer gasoline stocks.
 
"By this point in the season, nationwide gasoline inventories should be building, or at a minimum plateauing," Stephen Schork of the Schork Group said in a report.
 
New lower sulfur fuel specifications have forced refiners to increase the complexity of their equipment, making them more prone to outages.
 
In addition, gasoline demand is strong and showing no signs of slowing down as vacation season approaches, said Jason Schenker, economist for Wachovia Bank.
 
"We're in the first week of May -- the driving season hasn't really begun. If we are nowhere near peak demand, we're nowhere near peak prices," said Schenker.
"I think we could very likely see $3.25 as a national average and quite possibly spikes to $3.50," he said.
 
Despite high prices, Schenker said he thought motorists were unlikely to cancel planned vacations.
 
ALARM BELLS
 
Government officials have expressed concern about summer gasoline prices, but added they had no plans to temporarily relax environmental regulations to ease supply problems.
 
But AAA said rising prices highlights the need for government to take a closer look at energy policies.
 
"Today, we have $3.00 a gallon gasoline for the third time in the last three years. Alarm bells ought to be going off in the offices of every member of Congress and among the presidential candidates," said Sundstrom.
 
"We simply have to increase our ability to refine gasoline, we need a much more aggressive conservation program, we need to improve our ability to store gasoline on an emergency basis."
 
 

 

 

 




May 2007 Blogs

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