Oil prices are lower than they were a year ago but gas prices are higher…
http://www.iht.com/articles/2007/05/24/sports/prices.php
“Gas prices in the United States are soaring again - to an average of $3.22 a gallon, and close to $4 a gallon in many areas. Some oil executives are now warning that the current shortages of fuel could become a long-term problem, leading to stubbornly higher prices at the pump.”
“In his State of the Union address in January, President George W. Bush called for a sharp increase in the use of biofuels, along with some improvement in automobile fuel efficiency to reduce American use of gasoline by 20 percent within 10 years. Congress is considering legislation calling for a nearly fivefold increase in the use of ethanol.”
“That has forced many oil companies to reconsider or scale back their plans for constructing new refinery capacity. ” If the national policy of the country is to push for dramatic increases in the biofuels industry, this is a disincentive for those making investment decisions on expanding capacity in oil products and refining,” said John Hofmeister, the president of Shell Oil. “Industrywide, this will have an impact.”"
“Refineries are a choke point. Because they have not invested sufficiently in refineries to increase gasoline supplies, oil companies have been unable to meet the growing demand in recent years. That has forced them to rely on imports, which are more expensive than refining the fuel domestically.”
“Oil companies have rejected the idea of constructing new refineries as impractical and too expensive. Domestic refineries can process about 17.5 million barrels of crude oil each day, much of which is imported. But with consumption near 21 million barrels a day, more imports of refined products are also needed.”
From Lynn Westfall, the chief economist at the Tesoro Corporation on CNN’s American Morning (May 24, 2007)
“In a way we’re responsible, in the way that it’s a global market for gasoline. We’re now importing about 13% of our gasoline needs in the United States, and those imports have to be supplied by foreign refineries who are very inefficient at making US spec gasoline. So we have to bid up the price of gasoline on the world scale to give the incentive to these very inefficient refineries to make something that they weren’t built to make. We also have to pay the price to ship the product over here. So, yes, when US refineries are running at absolutely a hundred percent capacity, and demand keeps growing, we do have to go overseas to very inefficient refineries to fill our supply-demand gap.”
“Over the last nine months gasoline demand has gone up at the rate of two and a half new refineries a year, and we can’t build that kind of capacity. The industry has never been able to build that kind of capacity. So every year, if demand goes up that much — certainly we can do some things at existing refineries, and I think every refinery company is doing something at existing refineries to increase their capacity. But it’s being far outpaced by demand growth. So in fact we’re getting more and more dependent on imports.”
PS. Due to costly environmental regulations, there hasn’t been a refinery built in this country since the 1970’s.