I understand the economic reasoning for the higher prices, and it's clearly the lack of refining capacity.
My question is this: what evidence do we have that building new refineries is not economically viable?
I know that there is anecdotal evidence that there's always strong resistance from environmental groups, and that government regulation adds significant costs. But the same could be said of many other kinds of construction. Why is such opposition and government regulation a complete show-stopper for refineries?
With prices as high as they are, why don't oil companies very publicly announce plans for some new refineries, explaining that they are needed to improve supplies? Environmentalists would get a lot of heat from the public by objecting in the current economic climate.
While I don't believe most of the "Big Oil" baloney, they sure do appear to be acting in effective concert, though there likely is no formal cartel. There sure isn't much going on in the way of vigorous competition.
In my opinion, it is not "politically" viable.
Arizona refinery permit took seven years, Senate told
http://www.tucsoncitizen.com/daily/business/19103.php
Oil companies are spending billions of dollars upgrading and expanding existing refineries. For a couple decades the US refinery capacity and throughput has been increasing but it is getting very tight. The consequences of such tight margin capacity is upset results in great impacts as we have seen the last 3 months and in the aftermath of Katrina.
But the same could be said of many other kinds of construction.
Which is why our electric power generation and transmission grids are also pushing the limits on capacity.
With prices as high as they are, why don't oil companies very publicly announce plans for some new refineries, explaining that they are needed to improve supplies?
When they continue to increase throughput by expanding and upgrading existing refineries, why would they spend the time and money fighting this battle?