High Gasoline Prices – Ouch!

by Thom Holmes – Chairman, Constitution Party of Oklahoma

ThomHolmes2009Is your wallet feeling the sting of the rising gasoline prices? Mine sure is! Do you wonder why and what is causing it? We heard predictions at the beginning of this year that gasoline would set records for high prices this year which seemed pretty odd to me. However, several companies had already made known their plans to reduce the gasoline refining capacity in the East Coast region by 50% because those aging facilities were unprofitable. No matter what the product is, if you reduce capacity by 50% then it doesn’t take a rocket scientist to predict a rise in prices.

A simple internet search yielded that, “Recent closures in the refining sector have certainly been bad news for consumers. Sunoco Inc plans to shut a 14 million gallons-per-day Philadelphia refinery this summer if no buyer is found. And in the last few months in Pennsylvania, Sunoco shut a 7.5 million gallons-per-day refinery and ConocoPhillips closed a 7.8 millions gallons-per-day refinery. More recently, Hovensa SA shut its 14.7 million gallons-per-day joint venture refinery in the U.S. Virgin Islands.” (ref 1)

So, in a few short months 44 million gallons of gasoline per day has been or will soon be removed from the market. To learn why, I went to the ConocoPhillips website and found this statement in the press release about the closure and sale of their Trainer, PA refinery: “After exploring a wide range of alternatives for the refinery, the decision to sell is based on the level of investment required to remain competitive,” said Willie Chiang, senior vice president. “U.S. East Coast refining has been under severe market pressure for several years. Product imports, weakness in motor fuel demand, and costly regulatory requirements are key factors in creating this very difficult environment.” (ref 2)

New air emissions requirements and numerous other regulatory changes are making older facilities unprofitable, therefore companies are selling or closing them down. In fact, there have been no new refineries built in the U.S. since 1976 and in the past 35 years the number of refineries in our country has declined by 50%.

This reduction in refining capacity, and therefore the rise in gasoline prices, is a direct result of the laws and regulations coming out of Washington DC, and the American public is paying the price. Washington politicians and bureaucrats like to point at industry as being greedy and driving up prices to unreasonable levels when in fact rising prices are due to regulation induced supply shortages. So you see, the federal government is more to blame for the high gas prices than anyone else.

To learn the real truth about any topic we must dig deeper into the sound bites fed to us by the media, and fortunately with the internet as a tool it doesn’t take too long to learn the rest of the story.


References:

1. Why retail gasoline prices are nearing a record. By Myra P. Saefong, MarketWatch of the Wall Street Journal
http://www.marketwatch.com/story/why-retail-gasoline-prices-are-nearing-a-record-2012-03-01?pagenumber=1

2. Conoco Press Release 9-27-11

http://www.conocophillips.com/EN/newsroom/news_releases/2011news/Pages/09-27-2011.aspx