A new oil refinery hasn’t been built in the United States in nearly 30 years. If someone finds that surprising, they probably haven’t been listening to the latest round of Washington chatter on the topic of creating incentives for spurring development of new facilities to meet rising demand for gasoline.

Washington is notorious as a realm where politicians rail against the oil business and complain that gasoline prices are too high. The ambitious representative or senator is keen on telling his constituency that the price is too high for filling one’s gas tank, and that something, by gosh, must be done about it back at the center of the universe, otherwise known as Congress.
One solution, albeit far from the only one, is to focus Washington’s powers of persuasion on pushing the energy industry to build more refineries. Heck, just one would be both progress, not to mention a major psychological break with the long history of doing nothing.
On that score, Congress has been talking a good game lately, and so has the President. “We need more supply of gasoline for the sake of our consumers and for the sake of our economy,” Bush told the Economic Club of Washington earlier this week, Reuters reported via CNNMoney. “I’m going to work with Congress to pass a bill that makes it easier for current refineries to expand and encourages the construction of new refineries.”
Congress, like an ornery grandfather, may or may not be inclined to go along with the idea. It all depends on the day, the mood, and the details embedded in any given piece of proposed legislation. Certainly there’s no argument that the incentive to act is high these days, or at least make pronouncements from the political altar. Oil companies “need to invest in America’s energy infrastructure and resources,” House Speaker Dennis Hastert, R-Ill., said at a news conference on Tuesday. “The oil companies need to do their part.”
Congress, meanwhile, says it’s willing to do its part, but that seems to be little more than create a lot of light and heat with no tangible results. Welcome to the energy debate in the 21st century. It’s a cozy little world where Congress does little more than squabbles while Big Oil reports record profits once again this week (Exxon Mobil, for instance, announced this morning that its third-quarter profits surged 75% to a record for the company of almost $10 billion, Reuters reports).
Indeed, the House passed a plan to increase oil refinery capacity last week only to watch a Senate panel kill the bill yesterday. Republic Senator Lincoln Chafee joined with Democrats on the Senate Environment and Public Works Committee, which rejected the legislation. One reason, Chafee explained, was that a plan to promote developing new refineries focuses only on increasing supply. That, of course, is what building refineries is all about. No matter, Chafee and like-minded senators want a bill that also promotes conservation. “We have failed to address our consumption,” Chafee said, reported Environment News Service. “There is still time to do something in a comprehensive way.” Just not today.
In fact, the refinery legislation that the Senate panel rebuffed and the House endorsed (albeit narrowly and only with Republican support) is also criticized because it reportedly compromises environmental safeguards. Whatever the arguments for defeating the latest federal effort to boost refinery development, the need for new refineries goes on. And if Washington’s not up to the job, states may feel compelled to fill the void.
Consider, for instance, a report that Republican lawmakers in Iowa are considering their own approach for developing a new oil refinery in the state. “With all of the trouble that we have seen along the coasts, and we know that our coastlines are prone to damaging weather, that ends up inflicting the cost on the rest of us,” said Iowa House Speaker Christopher Rants via “It would seem to us that a refinery located somewhere along the Mississippi River [in] southeast Iowa might be an ideal place in the nation to have something like that.”
Ideal, perhaps, but hardly imminent. Meanwhile, the challenges in the energy marketplace roll on. The future may become strange as well as challenging on the energy front. Take yesterday’s news from the Energy Department, which reported that U.S. inventories of oil rose last week to a level that’s 12% above the amount from a year ago. Normally, one could say that’s an encouraging sign in the battle to elevate America’s supply of crude oil. But good news may be something less when considered within the context of refinery capacity that’s failed to keep up with demand.
“The buildup of crude is very impressive,” commodities strategist David Thurtell of the Commonwealth Bank of Australia in Sydney told AP today via Indeed, the inventory rise exceeded many forecasts. On the other hand, “It’s not necessarily a good thing to have a build in crude,” said Phil Flynn, a senior market analyst at Alaron trading in Chicago via “It means refineries did not get up and running as quickly as hoped. It’s a disturbing trend heading into winter.”
This much, at least, is clear: your local representative or senator is likely to swing by soon and tell you it’s an outrage that gasoline prices are so high. Talk may be cheap, but the price of inaction’s soaring.


  1. Mark

    It’s like Jimmuh Carter never left. Remember the windfall profits tax? The micro management of gas supplies down to the level of individual gas stations?
    Oil companies understand political risk. They went elsewhere to do exploration and build refineries.
    Jimmy Carter was fired for cause.

  2. spencer

    The windfall profits tax went into law in April, 2000 when the price of crude oil was some #39, its all time high before the recent spike. So how did the windfll profits tax hurt anything?

  3. lotek

    …supply and demmand, my boys. Regulation only kills incentive; market forces dictate prudent actions. Energy may be a great short term play, but for sure, it’s not going away…

  4. RichL

    As though the twerps in DC have much to say about oil.
    First, refinery capacity creep of ~2%/year from debottlenecking has been a constant for the last 30 years.
    Second, if you listen to any conference call on earnings from any company that has meaningful energy exposure, you will hear about the energy saving CapEx investments they are making…EVERY ONE!
    Third, on the HUN call on 11/2, they were discussing natural gas pricing at Houston being under $8/mcf, while Henry Hub is at $11.60 close today. It’s all in deliverability, with the high price getting the press, but the gas that is being bought and used in the Texas chemical industry being much closer to the BTU equivalent price of oil.

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