The Price of Gasoline

Much is being made of the higher prices for gas we are paying. Democrats and liberals are whining for the President to release oil from the Strategic Petroleum Reserve. Johnny boy Kerry says we should stop filling it in order to bring oil prices down. The whole purpose of the SPR is to have a reserve that can be tapped if the supply of oil is reduced or cut off. With the volitilaty of the current world situation, who knows when and if that could happen. Realistically, releasing oil from the SPR would have a negligable impact on the price of gas. The following commentary, from the Washington Times web site delves into this. - Sailor



NIMBY pressures . . . and oil slicks


By Tom Bray


As you contemplate those numbers spinning by on the gas pump, here is another number to remember: 1976.
That was the last time an oil refinery was built in the United States, thanks largely to the Not-In-My-Backyard (NIMBY) syndrome cultivated by an environmental movement that has successfully anathematized all things chemical and carbon. There are, of course, other reasons for the latest spike in gasoline prices — prominently including a return to robust economic growth and a desire by oil producers to protect themselves from recent declines in the dollar — but even if oil supplies could be suddenly expanded, refiners would have a tough time churning out more gasoline.


In 1981, according to the National Petrochemical and Refiners Association, 321 refineries pumped out 18.6 million barrels a day of gasoline. Today only 149 refineries, run by 60 companies in 33 different states, pump out 16.8 million barrels of gasoline daily — almost 2 million barrels a day less. They are operating at 93 percent of capacity, well above the industrial average, with little time left for maintenance and upgrades.
The inventiveness and adaptability of the U.S. economy has made it possible to achieve substantial economic gains with less energy. But this year's price spike could blunt the economic recovery if it persists, as some analysts say it might. And at the very least, $2.20 a gallon gasoline is a reminder that not all taxes are those paid April 15. Environmental regulations amount to a tax too, though even Republicans tend to shy away from the implications.
Direct state and federal gas taxes are heavy enough, amounting to a quarter of the cost of a gallon of gas. (Crude oil accounts for less than half the price of gasoline, refining 19 percent and distribution and marketing costs 11 percent, according to the U.S. Energy Information Administration.) But the national refinery association estimates environmental regulatory costs came to about $47 billion over the past 10 years, enough to build quite a few refineries.
Left-wingers rail about gouging, though refinery profit margins are only about 6 percent, less than half the industrial average. And presumptive Democratic presidential nominee John Kerry — whose family sports a Chevy Suburban, two smaller SUVs and a fuel-guzzling private jet — has called on the Bush administration to relieve the price pressure by deferring filling the National Petroleum Reserve.
Mr. Kerry's eagerness to find fault with Bush economic policies, now that the Bush income tax cuts seem to be delivering jobs, is understandable. A good argument also can be made that the emergency oil reserve is a bad idea, because it requires expenditure of financial resources that might be better used to make the American economy even more adaptable. But trying to turn the reserve into a mechanism for manipulating oil prices is an even worse idea.
Even draining the entire 600 million barrel reserve wouldn't make more than a temporary difference. The mammoth international oil market would quickly overwhelm the short-term impact of the relatively small reserve.
Nor will leaning on Saudi Arabia likely make much difference. The Saudis are already pumping relatively high — and have a vested interest in keeping prices reasonable. After all, they are plenty smart enough to know they would sell much less oil if the West sinks back into recession, something even the Islamist lunatics in Iran have come to realize.
Besides, the Saudis might reasonably ask, why doesn't the United States allow more drilling in its own territory? Congress is still sitting on a Bush administration proposal to allow drilling on a few acres of the vast Arctic National Wildlife Refuge because environmentalists object to anything intruding on a wilderness few of them will ever see — another example of the NIMBYism at the heart of the energy problem. Where was John Kerry's concern about oil prices when it came to a vote?
In a few years, vast new oil reserves will come on stream in Central Asia and elsewhere. But if the U.S. continues making it so difficult to develop new sources of energy, or to refine it into usable products, we will get pretty much what we deserve. So when you think of $3 a gallon, you should also think: 1976.

Tom Bray is a Detroit News columnist.