[thackney]

By the term "environmental issues," I meant the process of obtaining permits to build a new refinery. If the economics for a new refinery looked more favorable, then oil companies would work harder on obtaining the needed permits, which they are not doing.

But environmental issues even dictate foolish additional cost in operations. When so many different requirements about the gasoline used in different areas are incompatible with each other, it greatly increases the cost. Either you have to make many different types of gasoline, or you greatly limit your market.

[LOC1]

Directionally, one must agree with you.

However, once the major process units have been built to produce the gasoline components required to produce each grade of gasoline, the the operational cost involved in making several grades seems to be a blending and segregation issue. In other words, it take lots more trackage and a more robust shipping system to blend and ship 20 grades of gasoline, than it does to blend and ship 3 grades.

While the investment required for the tankage and additional working capital is significant, the operational costs in terms of energy, labor, maintenance, chemicals, catalyst, etc. don't appear to increase dramatically with the number of grades. Overall, one might estimate that the increased operational cost is of the order of a few cents per barrel.

On the other hand, the reduced gasoline endpoint requirement of the new regulations, and the requirement to limit the use of MTBE have reduced the amount of gasoline produced from a barrel of crude by 5-10%. This means more crude has to be processed somewhere in the world to make up for the lost gasoline production. It also means that the gasoline supply/demand balance becomes even tighter.

Perhaps I am missing something that you are thinking about. It has been a few years since I blended gasoline, so perhaps my perspective is dated.