Q: Does the U.S. lack adequate oil refining capabilities?

A:We’ve half as many refineries as we did in 1982, and they’re not assembly demands. Regulations, practical challenges and economic factors all play a task.

FULL Question

The lack of U.S. oil refinery capability keeps being blamed for some of the massive increases in gasoline prices. Do we lack refining capacity and, if so, why?

FULL Answer

Though oil refinery productiveness within the United States has been bettering, the variety of operating refineries has been dropping steadily. In 1982, the earliest year for which the Vitality Data Administration has information, there were 301 operablerefineries within the U.S., and theyproduced about 17.9 million barrels of oil per day. Right now there are solely 149 refineries, however they’re producing 17.Four million barrels less than in 1982, however greater than any yr since then. The increase in effectivity is spectacular, however it’s not sufficient to fulfill demand: U.S. oilconsumption is 20.7 million barrels per day. Refinery capability is not the one consider the price of gasoline, andaccording to the EIA it is not the most important one either (that would be the price of crude oil), but it’s certainly a contributor.

Current refineries have been operating at or close to full capability for the reason that mid-nineties, but are failing to fulfill daily consumption demands. Yet there hasn’t been a new refinery constructed within the U.S. since 1976. Why? Several factors: Constructing a refinery is costly, there are numerous environmentalrestrictions on where and how they can be constructed and no person needs to reside near one. Onecompany, Arizona Clear Fuels, has been trying to construct a refinery in the Southwest since 1998. Getting a permit to build took sevenyears, and the corporate twice modified the plant’s proposed location because of environmental restrictions and land disputes. The refinery isprojected to have a $three.7 billion complete value tag. The EIA recorded per-barrel profits of $5.29 in 2006; at that charge, the 150,000-barrel-per-day refinery would need to operate for nearly 13 years before its income outweighed the cost of building it.

In short, the reason for not adding extra refineries is easy: It is arduous, and it is expensive. The explanation that we have so few in the primary place is extra complicated. Within the 1980s and 1990s, there was a surplus of refining capacity. Then, over the course of two a long time, half of the plants shut down. In 2001, Oregon senator Ron Wyden offered to Congress areport arguing that these closings had been calculated decisions intended to extend oil firm profits. Fewer refineries means much less product in circulation, which implies a lower provide-to-demand ratio and extra profit. Wyden’s report cites internal memos from the oil business implying that this reduction was a deliberate attempt to curtail profit losses.

The economic pressures of oversupply may have led to plant closings even and not using a extra calculated resolution, after all. In 2005, the head of the National Petrochemical and Refiners Associationtestified at a House hearing that the speed of return on funding in refining averaged just five and a half p.c from 1993 to 2003.

Jess Henig

Porter, Adam. “Global refinery shortage shifts energy steadiness.” BBC Information. 2 Oct. 2005.

Mouawad, Jad. “No New Refineries in 29 Years? There Might Effectively Be a Reason.” The brand new York Instances. 9 Might 2005.

Schoen, John W. “U.S. refiners stretch to fulfill demand.” MSNBC. 22 Nov. 2004.

Reynolds, Sarah. “East County oil refinery will move.” Yuma Solar. 5 Feb. 2008.

Related Press. “Arizona refinery permit took seven years, Senate advised.” 14 Jul. 2006.

Wyden, Ron. “The Oil Business, Gasoline Supply and Refinery Capacity: Greater than Meets the attention.” 14 Jun. 2001.

109th United States Congress. “Petroleum Refineries: Will File Income Spur Funding in New Capability?” Home Subcommittee on Energy and Sources.