Tuesday, September 27, 2005
  Oil Refineries in the U.S.

Posted by: Fran 9/27/2005 11:45 AM

The president tells us that we must cut through more red tape to allow the building of new oil refineries in this country. I wonder if he's telling the truth??? (emphasis mine)

And, finally, these storms show that we need additional capacity in -- we need additional refining capacity, for example, to be able to meet the needs of the American people. The storms have shown how fragile the balance is between supply and demand in America. I've often said one of the worst problems we have is that we're dependent on foreign sources of crude oil, and we are. But it's clear, as well, that we're also really dependent on the capacity of our country to refine product, and we need more refining capacity. And I look forward to working with Congress, as we analyze the energy situation, to expedite the capacity of our refiners to expand and/or build new refineries.

Sounds to me like Dubya wants to use an emergency to by-pass the normal rules and regulations of a democracy. It sounds familiar to the Dubya, Cheney response to 9/11...keep the people panicked... WMD (gasoline prices), and do what you want...invade Iraq (build refineries).

This was an answer to a question:

And so I think if you take a good look at what it means to build a refinery, or expand a refinery, you'll find there's a lot of regulations and paperwork that are required, thereby delaying the capacity for more product to come on to the market and discouraging people from doing -- building refineries. That's why we haven't had one since 1970-something.

I assume we have increased our use of gasoline since the 1970's. How did we increase our supply without increasing our capacity?

A Dept of Energy affiliated website tells a different story about why we have fewer refineries. It seems Reagan might have had something to do with it: (emphasis mine)

The United States experienced a steep decline in refining capacity between 1981 and the mid-1990s. Between 1981 and 1989, the number of U.S. refineries fell from 324 to 204, representing a loss of 3 million bbl/d in operable capacity (from 18.6 million bbl/d to 15.7 million bbl/d), while refining capacity utilization increased from 69% to 87%. Much of the decline in U.S. refining capacity resulted from the 1981 deregulation (elimination of price controls and allocations), which effectively removed the major prop from underneath many marginally profitable, often smaller, refineries.

Refinery closures have continued since 1989, bringing the total number of operable U.S. refineries to 149 in 2003. In general, refineries that have closed have been relatively small and have had less favorable economics than other refineries in their market area. Also, in recent years, some smaller, less-economic refineries that had faced additional investments for environmental reasons in order to stay in business found closing preferable because they predicted that they could not stay competitive in the long term.

While some refineries have closed, and no new refineries have been built in nearly 30 years, many existing refineries have expanded their capacities. As a result of capacity creep," whereby existing refineries create additional refining capacity from the same physical structure, capacity per operating refinery increased by 28% over the 1990 to 1998 period, for example. Overall, since the mid-1990s, U.S. refinery capacity has increased from 15.0 million bbl/d in 1994 to 16.9 million bbl/d in September 2004. Also in September 2004, utilization of operating capacity at U.S. refineries was averaging around 90%, down from 97% in July and August. Although financial, environmental, and legal considerations make it unlikely that new refineries will be built in the United States, expansion at existing refineries likely will increase total U.S. refining capacity in the long-run.

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