Thursday, June 02, 2005


Why Does the US Need More Refineries?

Maybe I'm missing something - but why is relying on imported gasoline more risky than relying upon imported oil? Consider this article from Knight-Ridder news:
High investment costs and low profits have discouraged the building of any new U.S. refineries since 1976. Absent new refineries, rising demand for gas will outpace American refiners' ability to make it.
Investors fear that U.S. refineries are stretched too thin. A single accident could disrupt the strained supplies and lead to shortages. To ensure against that risk, buyers bid up the price of oil contracts, and the price of gasoline - a refined derivative of oil - rises in the process.
Source: Knight-Ridder Washington Bureau Running full throttle, U.S. refineries still can't meet demand for gas, June 2, 2005 [emphasis added.]
Other than special formulations, it seems to me that refining the oil into gasoline and/or diesel before importing it should be cheaper than hauling crude oil to the US first and then refining it. Why not import only what we want? After all, we either import the stuff and refine it here or import it after someone else refines it. It isn't like we're exporting US crude oil overseas for refining and then re-importing it...


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