Posted on 05/15/2007 12:46:56 PM PDT by NormsRevenge
WASHINGTON (Reuters) - American motorists will have to wait for weeks before they get relief from record high pump prices, the government's top energy forecaster said Tuesday.
The national average price for regular unleaded gasoline hit a record $3.10 per gallon this week amid strong demand and dwindling stockpiles after a stretch of refinery breakdowns and a slump in imports, according to the U.S. Energy Information Administration.
Retail prices will go even higher heading into the summer vacation season because not all of the recent rise in wholesale fuel costs has been reflected in what consumers pay at the pump, said EIA head Guy Caruso.
"There is still some wholesale price run-up that has not been passed through," Caruso told reporters at a Senate Energy and Natural Resources Committee hearing on summer gasoline prices. He declined to speculate how much higher fuel costs will go.
Consumers will eventually get some price relief as U.S. fuel producers boost production and high prices attract imports.
"With refinery production expected to improve during the rest of May and import volumes increasing over the last few weeks, gasoline markets may ease somewhat, causing gasoline prices to recede from their current high levels," Caruso told lawmakers.
However, Caruso warned that the EIA expected "gasoline markets to remain fairly tight this summer."
About 800,000 barrels per day in U.S. crude oil refining capacity is currently offline, which translates into about 400,000 barrels a day in lost gasoline production, EIA senior oil analyst Joanne Shore told reporters after the hearing.
"It is an unusually high amount," she said, adding that normally less than 100,000 barrels a day in oil refining capacity is out during this time of year.
EIA is the independent forecasting and analytical arm of the U.S. Energy Department.
The AAA motorist group told lawmakers it was concerned about the number and frequency of refinery outages this year "in light of the large profits the industry has been reporting."
AAA spokesman Geoff Sundstrom said it was "troubling" that the United States is not able to supply enough gasoline to meet domestic demand.
"Americans should be able to expect that those who refine oil into gasoline do a better job of anticipating demand growth, plan to meet that growth, and then make the necessary investments in plants, equipment and labor to provide the fuel at a cost that has some semblance of stability," Sundstrom said.
Oil companies are expanding their U.S. refineries, but a new refinery has not been built since the 1970s. The industry cites community opposition to new refineries and government regulations that make it too costly and difficult to construct facilities.
However, the planned refinery expansions over the next five years are not expected to keep up with the growth in U.S. petroleum demand, according to the EIA.
High gasoline prices are pinching the pocketbooks of Americans, helping to reduce sales last month at Wal-Mart and other retailers.
"When gas prices increase, there is less money to spend on other things," said Sundstrom. "The extra expense results in a sacrifice elsewhere in a family's budget -- groceries, healthcare, college saving, retirement planning."
Sen. Jeff Bingaman (news, bio, voting record), the Democrat who chairs the energy panel, acknowledged: "The U.S. economy remains vulnerable to oil and gasoline supply disruptions and associated price increases."
The top Republican on the committee, Sen. Pete Domenici (news, bio, voting record), said there was no "silver bullet" that would bring down rising gasoline prices this summer.
The solution for the long term, he said, is to increase drilling access to America's oil reserves and develop alternative fuels to reduce U.S. gasoline consumption.
Oh.... lets import more refined product. But we don't want to import more. Gee, what will we do? Any bets???????
there’s still way to much traffic congestion
3.39/gal doesn’t seem to be getting any poor people off the streets, darn it
$3.75 out my way and they are still out and about.
Let’s see, gas is $3.39, people are still buying SUVs. There is no inflation, yet. People are still driving as much as ever.
And what would make one believe that gas prices should fall? If you sell coffee cups, and you raise the price of your cups from $3 each to $5 each, and you are selling more than ever, why would you lower the price of your cups?
The easiest solution to implement that would help the fastest is to make a law stating that the federal formulation of gas is legal to sell in all states. End all boutique gasolines mandated by state EPAs, and refinery down times won’t affect fuel prices nearly as much.
Wot? It's a dumb idea. Sue me.
Actually, refinery shortfalls are not what you want for future innovation. What you want are crude oil prices at high and sustained prices to allow for the ROI for new fuel sources to become viable.
In fact, new refineries are no longer truly viable as businesses unless someone can invent a new technique to increase the production rate.
Yeah, but oil companies are not (ehhh-hem)supposed to be manipulating prices.
“Actually, refinery shortfalls are not what you want for future innovation. “
That’s the government’s job. It’s the oil companies job to make money. /< FR dogma>
You’re right, forward thinking businesses, and a proactive government would work to do that, to benefit all. Unfortunately, our government is full of self serving idiots, and our businesses are powered by profit now, today, or at longest, this quarter. And if government could actually bring the national interest into this, the oil companies would plead to being global enterprises, thus, unable to work in harmoney with any one government.
Note to Sundstrom: The oil companies don't have control over when and where they can build refinieries.
We have added 53 million people since 1990 and 100 million since 1970, most of it due to immigration, legal and illegal. That might have something to do with demand.
Anybody else find the joy of driving waining?
Actually,from 1975 to 2002 only one permit was ever submitted to the EPA to build a new refinery and that was the Arizona Clean Fuels.
From 1995 to 2002, 920,000 bpd of oil refining capacity has been taken off line by larger oil companies that bought out the independents. Those refinery sites are now non-operational.
The 5 largest refiners in the US, ExxonMobil, ConocoPhillips, BP, Valero and Royal Dutch Shell, are now in control of 57% of the refining capacity in th US. The top 10 refiners control 83% of refining capacity. Citgo (Chevez's oil co,) will soon have it's 10 refineries in the US on the auction block.
Recent mergers (the last 15 years) have resulted in oil company behavior such as: "U.S. Federal Trade Commission (FTC) concluded in March 2001 that oil companies had intentionally withheld supplies of gasoline from the market as a tactic to drive up prices—all as a “profit-maximizing strategy.” A May 2004 U.S. Governmental Accountability Office (GAO) report also found that mergers in the oil industry directly led to higher prices—and this report did not even include the large mergers after the year 2000, such as ChevronTexaco and ConocoPhillips. Yet, just one week after Hurricane Katrina, the FTC approved yet another merger of refinery giants—Valero Energy and Premcor—giving Valero 13% of the national market share. These actions, while costing consumers billions of dollars in overcharges, have not been challenged by the U.S. government ".
Therefore, without a doubt, Big Oil and the federal government have been in collusion to raise the prices of gas and oil as in that Big Oil took significant losses in the mid-1990's when oil was $17 / brl.
The capacity to refine in the US is still there to meet demand easily even though there has been a significant global increase in the demand for oil.
Everyone has a right to their opinion, however I don't need to watch the movie "Humpback Hill" to know what getting the shaft is all about.
Why you ask? Well we were heading into a recession then (2001), even before 9/11 and the gov't and the rollers and shakers (the rich knew it). Therefore, a market sector, energy, just like medical care, and now food and recently the housing / mortgage industry, was chosen to artificially stimulate to keep the economy afloat and provide the rich a reasonable return on their millions they have to invest.
I'm not bitter, that's just how it works.
Heck, I despised driving when gas was $1 / gal. (Boring)
From 1995 to 2002, 920,000 bpd of oil refining capacity has been taken off line by larger oil companies that bought out the independents. Those refinery sites are now non-operational.
US refinery capacity was in excess of our needs and some of the plants/capacity was taken off line because of location and inefficiency, i.e., it wasn't worth resuscitatting them. Instead, refinery capacity was increased in existeing facilities.
"One partisan argument against the refinery bill held that years-long delays in permitting new refineries are a myth. Another staple objection said companies were, in fact, actually shuttering their refineries as a ploy to increase demand.
It’s true that “the number of U.S. refineries has gone down by about half since the 1970s,” said Daniel Yergin of Cambridge Energy Research Associates. But “many of these were the small, ‘tea-kettle’ refineries that were intended to take advantage of the small-refiner bias under the 1970s control system.”
And Yergin told the House Energy and Commerce Committee Thursday that “the building of new refineries…has been hampered by costs, siting and permitting.” A
dded Energy Information Administrator Guy Caruso, the seasonal price-spreads on gasoline "have become subject to much wider swings … as excess refinery capacity has dwindled."
In the 1990's, U.S. refining was hit by lower gross margins following the peak years of 1988 and 1989. Also, over the same period, the capital intensity 96 of U.S. refining increased by 50 percent or so after remaining nearly unchanged for several years. Together, these developments underlie the generally low rates of return to U.S. refining and marketing in the 1990's. Examination of investment patterns in U.S. refining proves useful for understanding why capital intensity rose in some periods and was unchanged in other periods.
Therefore, without a doubt, Big Oil and the federal government have been in collusion to raise the prices of gas and oil as in that Big Oil took significant losses in the mid-1990's when oil was $17 / brl.
You can posit all of the conpiracy theories you want, but the facts say otherwise.
"The total quantity of crude processed by the nation's refineries (known as "throughput") has been steadily rising, despite the loss of half the facilities. Increased scale of operations at the remaining refineries has more than made up for the drop in the total number. It is true that capacity has not grown as fast as throughput, so that there is much less excess capacity in the system now than in 1976." The question about refining
It is business, but price manipulation is definitely at play as well as US national politics come 2008 and US forces in Muslim countries. Congress urged to ease pain of gas pricesThe American people need to wake up.
???
It is business, but price manipulation is definitely at play as well as US national politics come 2008 and US forces in Muslim countries. Congress urged to ease pain of gas pricesThe American people need to wake up.
Who is doing the manipulating? Your link seems to say otherwise.
"Consumers may suspect that oil refiners are colluding in the recent price spike, but analysts say the real culprit is an unprecedented number of refinery accidents and maintenance outages this spring — combined with drivers' rising demand for fuel. Most prominent of the outages was a February fire that shut down Valero Energy Corp.'s 170,000 barrel-per-day McKee refinery in Sunray, Texas, for months.
"If you just count incidents, there are more this year than there have been in previous years," said Mike Conner, a specialist on refinery operations at the EIA.
As a result, gasoline inventories fell by more than half, to 93.5 million barrels in the week ended May 4, from 205.1 million barrels in the same week in 2006 and 214.7 million barrels in 2005, according to government figures.
Charles Drevna, executive vice president of the National Petrochemical and Refiners' Association, said many refineries shut down for maintenance for the first time since their operations were kicked into overdrive by Hurricane Katrina. When the 2005 storm knocked out gas and oil facilities along the Gulf Coast, refineries in other parts of the country had to step in and pick up the slack, Drevna said. In many cases, that meant putting off regular maintenance for years.
"There's still a lasting effect from that," Drevna said.
Also, he said, the process of turning crude oil into gasoline has become more complicated over the years, particularly as different governmental entities have mandated changes to the chemical makeup of gasoline for environmental reasons. It takes more equipment, more complicated processes and more oil to make gasoline now than it used to, Drevna said.
Drevna said refiners have been steadily expanding their existing facilities, adding the equivalent of one new refinery a year, on average, every year for more than a decade. That's a cheaper and faster way to expand refinery capacity than going through the multiyear process of trying to win a permit to build new plants, he said.
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