Gasoline prices have soared an average of 60 cents a gallon in less than a month because suppliers are unable to keep up with demand, a situation that could persist up to three more years, Energy Secretary Samuel Bodman said Sunday..."Up to three more years" is a nice coincidence, since it will be at most that long before Mr. Bodman (not to be confused with the spray that will make chicks dig you) seeks employment elsewhere. In other words, he's not going to do anything about it. And he's right, because he can't.
But there was an interesting quote from Democratic senate whip Dick Durbin (Demagogue - Ill) in the same article, interesting because as I showed below, big oil already pays or passes $4 in taxes for every $1 it profits: “if you do not tax these corporations ... they will continue to run up the profits to high heavens.”
As usual, to Democrats, the profits are the problem.
But I asked the expert (or rather, the cfdxprt) the odds of more supply coming online, a prospect that Bodman pushes into Hillary's first term. His answer is enlightening:
Increasing the supply, at least in the short-term, is a non-starter. We're not limited by the amount of crude oil we can get into the country, we're limited by the amount of that oil that we can refine into useful products, and we will be for the foreseeable future.
At maximum the industry will run at 92-94% of maximum capacity, mainly because plants do trip and they do have to be shut-down and maintained. Currently we're running at about 85% of refining capacity for a few reasons.
First, there are still refineries that haven't come back after the hurricanes. For at least one of them, the prospects for making it back online this year look dim.
Second, we reached a point where refineries had to be taken off-line for maintenance for 2 reasons: due to clean air standards the refineries are having to switch over to summer gas which means they have to add more oxygen to it (not worth a darn on pollutants from a fuel injected car with a working oxygen sensor, but it's the law).
Also, the decision was made to not take refineries offline for non-critical repairs after the hurricanes, and I'm not pointing fingers on who made the decision or what influence was wielded, but things were done to keep gas artifically low for a while. The non-critical maintenance has now become critical, so they have to take the refineries offline or risk breaking them (read: blowing something up and taking a long time to fix).
Why don't we just build more refineries? It's not that the oil companies aren't willing to put up the money, they're currently building 6-8 large refineries in other parts of the world. The primary reason is that it is almost impossible to get a refinery built and permitted for operation in this country anymore due to environmental regulations. The industry standard for a very long time (adjusted for inflation) is that the refiner gets about 5c for every gallon of gas they produce, so they are keen on producing as much gas as possible, if they could.
So other than maybe getting another 7% capacity back online, we're strapped. The only solution at that point becomes either increase the price and burn all we can or decrease the demand. Now I fit into the bike guy's comments when I chuckle at people putting $100 worth of gas into their Navigators, and a car would have been nice today since I'm still drying out from my morning commute, so every solution has its comprimises. Just don't expect a quick fix coming from the oil industry.
There's no quick fix coming from the oil industry. There's no quick fix coming from the government. The only quick fix that remains is to use less fuel, which is also the long-term fix, yet seems to be the hardest for the individual to accomplish. As for Bodman's three years, perhaps he expects the Chinese will be so kind as to stop growing their economy all that time or refrain from buying more gas with all those depreciating dollars they hold. How do you say, "Pshaw!" in Chinese?