2006 News - High Gas Prices again.... solutions have been
around for years but ignored
One of many solutions - Increase refining capacity. There hasn’t
been a new refinery built in the U.S. since 1976, the result of extremely tight
environmental restrictions, not-in-my-back-yard community opposition, and the high cost of
new construction. Used refineries currently sell for about 30 to 50 percent of the cost of
building a new one, so it’s cheaper to buy an old refinery and upgrade it. Or squeeze
a little more gasoline out of the refineries they already own. What about the numerous
army bases that have been shut down? Government land to build new refineries... review the
restrictions in place and ease them.
U.S. refiners continue to operate nearly flat out. As of this week, the industry is
producing gasoline and other end products at something like 98 percent of capacity. And
with the overall growth in demand for motor fuels and heating oil showing no signs of
slowing, prices will continue to be driven as much by tight refining capacity as by the
recent run-up in crude prices. Heating oil inventories are roughly at average levels for
this time of year, but prices continue to climb. That’s due in part to concerns that
prices could spike on any interruption in production, anything from a
longer-than-scheduled maintenance shutdown to emergency repair or fire.
That article was Archived in 2004. Nothing done by political hacks to build new
refineries. They blame high gas prices on anyone or anything but their own foot dragging
and political benefactors.
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Or could we be headed for $5 gas?
Gasoline prices set a new record earlier this month in the wake of hurricane Katrina, but
costs were already rising fast before the superstorm collided with the Gulf Coast. The
average price of regular gasoline has more than doubled since 2002, when it stood at just
$1.36 a gallon. Since reaching $3.01 earlier this month, topping the 1981 high of $3.00
(adjusted for inflation), consumers are worried. Will this four-year price spiral stop? Or
could we be headed for $5 gas?
Right now, prices are falling as the summer driving season ends and Gulf Coast refineries
return to service. Yet the long-term outlook appears shaky. That's because the future
price of oil, which hinges on everything from OPEC policies to Chinese energy demands,
could easily keep going up.
But there are at least four areas where oil-importing nations can dampen the effects of a
rise in oil prices. The United States has fallen short in anticipating all four, energy
experts say.
For example:
Refining capacity. "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 today, even if the Saudis and their oil allies filled up 1,000 tankers and sent them
steaming to the US, it's not clear that gas prices would fall very much.
The problem is twofold: US refiners' lack of capacity to handle the extra load, as well as
technical problems with the types of heavy crude produced in much of the Middle East.
US firms are expected to rectify these shortcomings, but it will take years. Meanwhile,
supplies of refined product are so tight that the US is now importing gasoline, not just
oil, from Canada and Europe.
Government policy. Back in the 1970s energy crisis, which included an
OPEC oil embargo, Congress got tough with actions that included creation of the Strategic
Petroleum Reserve, minimum gas-mileage requirements for cars and trucks (CAFE standards),
and "double nickel" (55 mile-per-hour) speed limits.
By comparison, this Congress and president took less decisive measures. They have
subsidized alternative energy and passed an energy bill this year. The White House has
proposed raising CAFE standards slightly. But it was too little and too late to head off
the price spike. Both branches of the federal government could become more active if
prices keep moving up.
Auto efficiency. The nation's Big Three automakers - General Motors, Ford, and
DaimlerChrysler - have made the bulk of their profits in recent years with large and not
particularly fuel-efficient trucks and SUVs. Very often, technical improvements to
engines, which could have been used to boost gas mileage, went instead to increase
horsepower and speed.
There were exceptions to the trend, especially among Japanese automakers Toyota and Honda.
Both developed hybrid-model cars (the most popular of which is the Toyota Prius) that
combine gasoline and electric engines to increase mileage into the 47-to-66
miles-per-gallon range. |
