Gas Price Surge Under Bush Follows Unchecked Increase in Refinery Mergers

Bloomberg News ^ | 5/17/04 | Jim Efstathiou Jr.

[machman]

May 17 (Bloomberg) -- President George W. Bush allowed an increase in oil refinery mergers to go unchecked since he took office and may have contributed to the highest gasoline prices in 20 years as the November election approaches.

The Bush administration approved 33 takeovers totaling $19.5 billion, on top of 21 deals worth $7.3 billion under President Bill Clinton, Bloomberg data shows. Reduced supplies were already pushing up gas prices in Clinton's term, according to a Federal Trade Commission study conducted after pump prices rose to more than $2 a gallon in Milwaukee and Chicago in 2000.

[AxelPaulsenJr]

Nice article by the dnc.

[Bikers4Bush]

Wrong, it's a combination of the two.

The real question is, how many refineries have been closed or downed for an unusually long period of time as a result of the mergers?

[Servant of the 9]

Regardless of who is responsible for the rise in gas prices, the auto manufacturers need to use improved technology so that cars can run efficiently on renewable sources of energy.

You want a wood burning car?

So9

[KarlInOhio]

I saw another article (it might have been on FR yesterday) which talked about the marginal effect of an oil price change on gasoline prices. It looked like the way to calculate the "oil cost" in gasoline is to take the per barrel price and divide by 43.

The the quoted price of $41.38 a barrel means that the oil costs 96.2 cents/gallon of gas. Then add taxes (42 cents/gal in Ohio), shipping expenses, refinery expenses and station expenses.

[liberallarry]

Between 1977 and 2002...U.S. demand for gasoline has grown 27 percent
European gasoline prices are at their highest recorded levels due to demand from the U.S
Demand from Asia has boosted the price of crude oil
World oil demand is rising at its fastest rate since 1988
Gasoline prices have to get well above current levels to think we would see a substantive and mature impact on the economy

So you can expect gas prices to rise well above their current levels in the next year...says Liberallarry, 66.

[Recovering_Democrat]

[A 'registered Republican' said]``The average guy on the street is getting killed because this administration does not care.''

Only an idiot (or a Democrat Party hack, whether you call yourself a "Republican" or not) would think this: the administration has consistently advocated greater exploration and extraction of our own oil resources in order to keep us from being oil-dependent.

Additonally, the merging of refinery companies proves nothing.

Our increase in oil is due to the increased demand from Asia, China particularly, and due to an inability to refine the crude...OPEC could help by increasing production, but if you don't have the ability to refine the stuff, it won't make a huge difference.

No new refineries have been built in the USA in at least, what, 10 years? That is a huge problem...

I am amazed how fast some people are to point fingers at the current administration. :) Some simple, simple economic lessons are in order for a lot of people. I am hopeful, though: I think more people are "getting it" when it comes to some of these basic economic facts.

[dead]

That Bush!

Is there nothing bad that he cannot do?

[jmaroneps37]

Actually it is really Abe Lincoln's fault. Hey anyone knows that!

[anoldafvet]

Bingo! That is exactly the reason for most of the increases. Since the mandate of "designer gasolines", it's much more expensive to refine gasoline due to the constantly changing formulas, which means the refinery can't run a continuous process. It's also more expensive to ship since the "designer formulas" can't be mixed, they have to move by truck rather than pipeline, and shortages in one area can't be covered by surpluses in another due to the different formulas.

[jeremiah]

The article says prices are up 30% and the avg price per gallon is 1.94??? Well prices are averaging closer to 2.20 a gallon in Washington state. This had better stop and reverse itself, or Bush will lose the election. It is as simple as that. People will vote on their pocketbooks.

[Dog Gone]

There are only 42 gallons of oil in a Barrel of crude, ergo each incremental $1.00 rise in crude adds $0.023 to each gallon of gasoline.

You can't get 42 gallons of gasoline from a barrel of oil. It's more like 19 gallons of gasoline, the rest being converted into other petrochemicals and asphalt.

[TexasCajun]

Mergers? Hell yes!

8 Years of a democrat/enviromental adminstration where the business enviromnet was so hostile not one new refinery has been built in the last 10 yrs!

[Morgan in Denver]

Good catch machman

Something not mentioned, or really understood, is not all the oil in a barrel of oil goes for gasoline. If I remember right, it's only about ten percent of the oil in the barrel is suitable for gasoline production. That means, consumers should be aware of other prices rising as well. Such things as plastics, denim and anything that uses oil in the product.

[Jimmy Valentine's brother]

ConocoPhillips, which produces a sixth of the nation's gasoline, said its plants are operating at 97 percent of capacity. No new refineries have been built in the U.S. since 1976 because of the difficulty in getting approval to build plants and the cost of construction, said Drevna of the National Petrochemical & Refiners Association.

Looks like a straight demand and supply issue demand is up supply unchanged. What happened in 1976 that resulted in no more refineries being built?

Folks this will get much worse. If refineries are opeating at 97% capacity that means that not much preventative maintenace is goin on. Look for major refinery outages.

[Timocrat]

You are right. To expand on your number three. Until Bush, as Govenor of Texas gave them a waiver refineries couldn't implement upgrades unless they brought them up to 100% EPA standards, so a 70% improvement was sacrificed because it was not cost effective to pay for the 100% improvement. If Bush hadn't granted waivers to the Texas refineries the supply situation would be even more critical than it is today.

As an earlier post explained we have not built a new refinery for 27 years, ROI is lousy, NIMBYs prevent any increase in existing capacity. Added to the fact that we are not building enough electricity generating capacity and our natural gas supply is about to go critical, we are headed for an energy supply crunch in the not too distant future.

[Eva]

B S, the refinery mergers took place under the Clinton administration, not Bush.

[okie01]

Refineries are a lousy business. Most of the time they register a profit of 5 cents or less per gallon, and there have been years when they actually lose money on each gallon.

Seems I recall a news story that equated the current average national retail price ($1.82, as of last week) with the average national retail price in 1954 ($.27), adjusted for inflation.

However, given the even greater disparity in state & federal taxes, my guess is that, adjusted for inflation, the price of gasoline at the pump (ex. tax) has actually dropped over the past fifty years.

Accordingly, I find it very difficult to demonize the oil companies, in particular, and capitalism, in general, for rising prices.

[azhenfud]

"Americans are paying 30 percent more for regular gasoline than a year ago...

The rise in gasoline prices helped refiners generate the highest margins from refining crude oil into gasoline and other fuels in the first quarter since at least 1990. ConocoPhillips, the largest U.S. oil refiner, last month posted its biggest quarterly profit since the 2002 acquisition that formed the company. ChevronTexaco Corp., the second-biggest U.S. oil producer, said earnings rose 33 percent to the highest level since a 2001 merger formed the company. Chevron's first-quarter refining profit doubled.

Exxon Mobil Corp., the second-largest U.S. refiner, on April 29 reported its highest first-quarter refining earnings in 13 years. Valero Energy Corp., the No. 3 U.S. refiner, said on April 28 that profit will almost triple in the current quarter after increased demand for gasoline spurred a 46 percent earnings gain in this year's first three months."

For all who think crude prices are the reason pump prices are so high, follow the money.

[skinkinthegrass]

"If this is true...5)And way down the list, Crude prices.

excellent points.. :)

[edsheppa]

the marginal effect of an oil price change on gasoline prices...The the quoted price of $41.38 a barrel means that the oil costs 96.2 cents/gallon of gas.

Uh, that is not a marginal effect calculation.