Q: Does the U.S. lack adequate oil refining capabilities?
A:We now have half as many refineries as we did in 1982, and they’re not meeting demands. Regulations, sensible challenges and financial components all play a job.
FULL Question
The lack of U.S. oil refinery capability keeps being blamed for a few of the massive will increase in gasoline prices. Can we lack refining capability and, if that’s the case, why?
FULL Reply
Although oil refinery productiveness within the United States has been enhancing, the variety of operating refineries has been dropping steadily. In 1982, the earliest 12 months for which the Power Information Administration has knowledge, there have been 301 operablerefineries within the U.S., and theyproduced about 17.9 million barrels of oil per day. At present there are solely 149 refineries, however they’re producing 17.Four million barrels lower than in 1982, however more than any yr since then. The rise in effectivity is spectacular, however it is not sufficient to satisfy demand: U.S. oilconsumption is 20.7 million barrels per day. Refinery capacity isn’t the one think about the price of gasoline, andaccording to the EIA it is not a very powerful one either (that can be the price of crude oil), however it’s definitely a contributor.
Existing refineries have been working at or near full capability for the reason that mid-1990s, however are failing to satisfy daily consumption demands. Yet there hasn’t been a brand new refinery constructed within the U.S. since 1976. Why? A number of elements: Constructing a refinery is expensive, there are a lot of environmentalrestrictions on where and the way they are often constructed and no one wants to reside near one. Onecompany, Arizona Clean Fuels, has been attempting to assemble a refinery in the Southwest since 1998. Getting a permit to build took sevenyears, and the company twice modified the plant’s proposed location because of environmental restrictions and land disputes. The refinery isprojected to have a $three.7 billion complete worth tag. The EIA recorded per-barrel profits of $5.29 in 2006; at that charge, the one hundred fifty,000-barrel-per-day refinery would have to operate for almost 13 years before its earnings outweighed the price of building it.
Briefly, the reason for not adding more refineries is easy: It’s arduous, and it is costly. The rationale that we now have so few in the first place is more difficult. In the 1980s and 1990s, there was a surplus of refining capability. Then, over the course of two many years, half of the plants shut down. In 2001, Oregon senator Ron Wyden offered to Congress areport arguing that these closings have been calculated selections meant to extend oil firm income. Fewer refineries means less product in circulation, which means a lower supply-to-demand ratio and more revenue. Wyden’s report cites inside memos from the oil industry implying that this discount was a deliberate try and curtail profit losses.
The financial pressures of oversupply might have led to plant closings even without a extra calculated determination, in fact. In 2005, the head of the Nationwide Petrochemical and Refiners Associationtestified at a Home hearing that the speed of return on funding in refining averaged simply 5 and a half percent from 1993 to 2003.
Jess Henig
Porter, Adam. “International refinery shortage shifts energy balance.” BBC Information. 2 Oct. 2005.
Mouawad, Jad. “No New Refineries in 29 Years? There Might Effectively Be a Purpose.” The brand new York Occasions. 9 Might 2005.
Schoen, John W. “U.S. refiners stretch to fulfill demand.” MSNBC. 22 Nov. 2004.
Reynolds, Sarah. “East County oil refinery will transfer.” Yuma Solar. 5 Feb. 2008.
Associated Press. “Arizona refinery permit took seven years, Senate advised.” 14 Jul. 2006.
Wyden, Ron. “The Oil Industry, Gasoline Provide and Refinery Capability: More than Meets the attention.” 14 Jun. 2001.
109th United States Congress. “Petroleum Refineries: Will Document Income Spur Investment in New Capability?” House Subcommittee on Vitality and Assets.
