WASHINGTON - A push from Congress and the White House for huge increases in biofuels, such as ethanol, is prompting the oil industry to scale back its plans for refinery expansions. That could keep gasoline prices high, possibly for years to come.
With President Bush calling for a 20 percent drop in gasoline use and the Senate now debating legislation for huge increases in ethanol production, oil companies see growing uncertainty about future gasoline demand and little need to expand refineries or build new ones.
Biofuels such as ethanol and efforts to get automakers to build more fuel-efficient cars and SUVs have been portrayed as key to countering high gasoline prices, but they are likely to do little to curb costs at the pump today, or in the years ahead as refiners reduce gasoline production.
"The fact is that Americans are paying more at the pump because we do not have the domestic capacity to refine the fuels consumers demand," Inhofe complained as he tried unsuccessfully to get into the bill a proposal to ease permitting and environmental rules for refineries.
Consumer advocates maintain the oil industry likes it that way.
Only last year, the Energy Department was told that refiners, reaping big profits and anticipating growing demand, were looking at boosting their refining capacity by more than 1.6 million barrels a day, a roughly 10 percent increase. That would be enough to produce an additional 37 million gallons of gasoline daily.
"These (expansion) decisions are being revisited in boardrooms across the refining sector," said Charlie Drevna, executive vice president of the National Petrochemical and Refiners Association.
In 2006, motorists used 143 billion gallons of gasoline, of which 136 billion was produced by U.S. refineries, and the rest imported.
"We will end up exporting gasoline," said Drevna.
Valero Corp., the nation‘s largest refiner producing 3.3 million barrels a day of petroleum product, recently boosted production capacity at its Port Arthur, Texas, refinery by 325,000 barrels a day. But company spokesman Bill Day said some additional expansions have been postponed.
"That‘s not to say we‘ve changed our plans," Day said in an interview. "But it‘s fair to say we‘re taking a closer look at what the president is saying and what Congress is saying" about biofuels. He said there‘s a "mixed message" coming out of Washington, calling for more production but also for reducing gasoline demand.
"It‘s something that we have to study pretty carefully," said Day.
Ron Lamberty of the American Coalition for Ethanol said all the talk about biofuels threatening gasoline production is the "latest attempt to blame ethanol on Big Oil‘s failure to meet our energy needs."
"The ethanol industry continues to grow while oil refiners continue to make excuses for maintaining their profitable status quo," said Lamberty.
Sen. Byron Dorgan, D-N.D., said consolidation of the oil industry into fewer companies has left them with no incentive to expand refineries.
"It‘s a perverted system that does not act as a free market system would act," said Dorgan. "If you narrow the neck of refining, you actually provide a greater boost to prices which is a greater boost to profitability."
Richard Blumenthal, the attorney general of Connecticut, wants Congress to require refiners to maintain a supply cushion in case of unexpected outages.
In the 1980s, Blumenthal said at a recent hearing, refiners were producing at 77.6 percent of their capacity, "which allowed for easy increases in production to address shortages. In the 1990s, as the industry closed refineries, ... (that figure) rose to 91.4 percent, leaving little room for expansion to cover supply shortfalls."
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The bill being debated in the Senate is HR 6.
By H. JOSEF HEBERT, Associated Press Writer Sun Jun 17, 7:26 PM ET
WASHINGTON - A push from Congress and the White House for huge increases in biofuels, such as ethanol, is prompting the oil industry to scale back its plans for refinery expansions. That could keep gasoline prices high, possibly for years to come.
With President Bush calling for a 20 percent drop in gasoline use and the Senate now debating legislation for huge increases in ethanol production, oil companies see growing uncertainty about future gasoline demand and little need to expand refineries or build new ones.
Biofuels such as ethanol and efforts to get automakers to build more fuel-efficient cars and SUVs have been portrayed as key to countering high gasoline prices, but they are likely to do little to curb costs at the pump today, or in the years ahead as refiners reduce gasoline production.
"The fact is that Americans are paying more at the pump because we do not have the domestic capacity to refine the fuels consumers demand," Inhofe complained as he tried unsuccessfully to get into the bill a proposal to ease permitting and environmental rules for refineries.
Consumer advocates maintain the oil industry likes it that way.
Only last year, the Energy Department was told that refiners, reaping big profits and anticipating growing demand, were looking at boosting their refining capacity by more than 1.6 million barrels a day, a roughly 10 percent increase. That would be enough to produce an additional 37 million gallons of gasoline daily.
"These (expansion) decisions are being revisited in boardrooms across the refining sector," said Charlie Drevna, executive vice president of the National Petrochemical and Refiners Association.
In 2006, motorists used 143 billion gallons of gasoline, of which 136 billion was produced by U.S. refineries, and the rest imported.
"We will end up exporting gasoline," said Drevna.
Valero Corp., the nation‘s largest refiner producing 3.3 million barrels a day of petroleum product, recently boosted production capacity at its Port Arthur, Texas, refinery by 325,000 barrels a day. But company spokesman Bill Day said some additional expansions have been postponed.
"That‘s not to say we‘ve changed our plans," Day said in an interview. "But it‘s fair to say we‘re taking a closer look at what the president is saying and what Congress is saying" about biofuels. He said there‘s a "mixed message" coming out of Washington, calling for more production but also for reducing gasoline demand.
"It‘s something that we have to study pretty carefully," said Day.
Ron Lamberty of the American Coalition for Ethanol said all the talk about biofuels threatening gasoline production is the "latest attempt to blame ethanol on Big Oil‘s failure to meet our energy needs."
"The ethanol industry continues to grow while oil refiners continue to make excuses for maintaining their profitable status quo," said Lamberty.
Sen. Byron Dorgan, D-N.D., said consolidation of the oil industry into fewer companies has left them with no incentive to expand refineries.
"It‘s a perverted system that does not act as a free market system would act," said Dorgan. "If you narrow the neck of refining, you actually provide a greater boost to prices which is a greater boost to profitability."
Richard Blumenthal, the attorney general of Connecticut, wants Congress to require refiners to maintain a supply cushion in case of unexpected outages.
In the 1980s, Blumenthal said at a recent hearing, refiners were producing at 77.6 percent of their capacity, "which allowed for easy increases in production to address shortages. In the 1990s, as the industry closed refineries, ... (that figure) rose to 91.4 percent, leaving little room for expansion to cover supply shortfalls."
___
The bill being debated in the Senate is HR 6.
