High Gas Prices? We Don't Need No Stinkin' High Gas Prices!

This is such a good post, as that "open up offshore drilling rights" is as big a canard as the gas tax holiday. Not only does it take years to find oil, put in place the deep-water drill and then remove it from the ocean floor - any oil retrieved is going to be a rounding error when compared to escalating global demand.

Whenever anyone questions the high gasoline prices we are currently paying, ask them what their stance was on the consolidation of our oil industry? The reconstitution of Standard Oil into ExxonMobil, ChevronTexaxo and ConocoPhillips not only allowed them to increase their profits (the whole point of mergers), but it also allowed them to shutter dozens of oil refineries across the country. So when people pull out that chestnut about "no new refineries have been built in the last 30-years - ask them how many refineries (and thus refinery capacity) has been closed by the same oil companies as part of their consolidation efforts.

Now, should you find someone willing to engage in this conversation and knowledgeable enough to continue to debate, they will most likely reach for the chestnut that says refined product has actually increased across all of those refinery closures, as processes and tooling upgrades have made gains for remaining refineries. But this belies the point that had the other refineries not been shuttered, they too could have taken part in those improvements, so that even more refined product - gasoline and diesel - would now be on the market.

Increased supply drives down the price as well as the profits.

That should end the discussion, allow the pivot to solutions to take place:

1. Do not allow the integrated oil companies to spin-off their refinery capacity.

2. Treat refineries the way regulated utilities used to be treated. This is not a competitive market. Most regions of the country have mandates that specify the fuel blend allowed, so the search for profit here is useless. Mandate refiners sell their product to retailers at cost.

3. Consolidate the hodgepodge of regional fuel blends into one, so that refiners can produce for a nationwide market without needing to produce one-off specials. This will raise the cost for some areas that do not have air quality mandates, but the overall savings will lower average prices for all.

Sphere: Related Content

No comments: