Ethanol could keep price of gas high

[peejay 327]

Ethanol could keep price of gas high

Industry won’t expand refineries since demand for gas will remain the same

The Associated Press

Updated: 6:05 p.m. CT June 17, 2007

WASHINGTON - A push from Congress and the White House for huge increases in biofuels, such as ethanol, is prompting the oil industry to scale back its plans for refinery expansions. That could keep gasoline prices high, possibly for years to come.

With President Bush calling for a 20 percent drop in gasoline use and the Senate now debating legislation for huge increases in ethanol production, oil companies see growing uncertainty about future gasoline demand and little need to expand refineries or build new ones.

Oil industry executives no longer believe there will be the demand for gasoline over the next decade to warrant the billions of dollars in refinery expansions — as much as 10 percent increase in new refining capacity — they anticipated as recently as a year ago.

Biofuels such as ethanol and efforts to get automakers to build more fuel-efficient cars and SUVs have been portrayed as key to countering high gasoline prices, but it is likely to do little to curb costs at the pump today, or in the years ahead as refiners reduce gasoline production.

A shortage of refineries frequently has been blamed by politicians for the sharp price spikes in gasoline, as was the case last week by Sen. James Inhofe, R-Okla. during debate on a Senate energy bill.

“The fact is that Americans are paying more at the pump because we do not have the domestic capacity to refine the fuels consumers demand,” Inhofe complained as he tried unsuccessfully to get into the bill a proposal to ease permitting and environmental rules for refineries.

This spring, refiners, hampered by outages, could not keep up with demand and imports were down because of greater fuel demand in Europe and elsewhere. Despite stable — even sometimes declining — oil prices, gasoline prices soared to record levels and remain well above $3 a gallon.

Consumer advocates maintain the oil industry likes it that way.

“By creating a situation of extremely tight supply, the oil companies gain control over price at the wholesale level,” said Mark Cooper of the Consumer Federation of America. He argued that a wave of mergers in recent years created a refining industry that “has no interest in creating spare (refining) capacity.”

Only last year, the Energy Department was told that refiners, reaping big profits and anticipating growing demand, were looking at boosting their refining capacity by more than 1.6 million barrels a day, a roughly 10 percent increase. That would be enough to produce an additional 37 million gallons of gasoline daily.

But oil companies already have scaled those expansion plans back by nearly 40 percent. More cancellations are expected if Congress passes legislation now before the Senate calling for 15 billion gallons of ethanol use by 2015 and more than double that by 2022, say industry and government officials.

“These (expansion) decisions are being revisited in boardrooms across the refining sector,” said Charlie Drevna, executive vice president of the National Petrochemical and Refiners Association.

With the anticipated growth in biofuels, “your getting down to needing little or no additional gasoline production” above what is being made today, said Joanne Shore, an analyst for the government’s Energy Information Administration.

In 2006, motorists used 143 billion gallons of gasoline, of which 136 billion was produced by U.S. refineries, and the rest imported.

Drevna, the industry lobbyist, said annual demand had been expected to grow to about 161 billion gallons by 2017. But Bush’s call to cut gasoline demand by 20 percent — through a combination of fuel efficiency improvements and ethanol — would reduce that demand below what U.S. refineries make today, he said.

“We will end up exporting gasoline,” said Drevna.

Asked recently whether Chevron Corp. might build a new refinery, vice chairman Peter Robertson replied, “Why would I invest in a refinery when you’re trying to make 20 percent of the gasoline supply ethanol.”

Valero Corp., the nation’s largest refiner producing 3.3 million barrels a day of petroleum product, recently boosted production capacity at its Port Arthur, Tex., refinery by 325,000 barrels a day. But company spokesman Bill Day said some additional expansions have been postponed.

“That’s not to say we’ve change our plans,” Day said in an interview. “But it’s fair to say we’re taking a closer look at what the president is saying and what Congress is saying” about biofuels. He said there’s a “mixed message” coming out of Washington, calling for more production but also for reducing gasoline demand.

“It’s something that we have to study pretty carefully,” said Day.

Ron Lamberty of the American Coalition for Ethanol, said all the talk about biofuels threatening gasoline production is the “latest attempt to blame ethanol or Big Oil’s failure to meet our energy needs.”

“The ethanol industry continues to grow while oil refiners continue to make excuses for maintaining their profitable status quo,” said Lamberly.

Sen. Byron Dorgan, D-N.D., said consolidation of the oil industry into fewer companies has left them with no incentive to expand refineries.

“It’s a perverted system that does not act as a free market system would act,” said Dorgan. “If you narrow the neck of refining, you actually provide a greater boost to prices which is a greater boost to profitability.”

Richard Blumenthal, the attorney general of Connecticut, wants Congress to require refiners to maintain a supply cushion in case of unexpected outages.

In the 1980s, Blumenthal said at a recent hearing, refiners were producing at 77.6 percent of their capacity, “which allowed for easy increases in production to address shortages. In the 1990s, as the industry closed refineries, ... (that figure) rose to 91.4 percent, leaving little room for expansion to cover supply shortfalls.”

2007 The Associated Press.

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Fact file: Ethanol vs. gas

Here are some facts on refinery gasoline production and ethanol use.

— Number of U.S. refineries: 149

— U.S. refinery gasoline production: 136 million gallons a day.

— Gasoline demand: 143 million gallons a day (imports make up the difference)

— Annual ethanol production today: 5 billion gallons.

— Annual ethanol production requirements being considered by Congress: 15 billion gallons by 2015; 36 billion gallons by 2022.

http://www.msnbc.msn.com/id/19276523/

[Robor007 0]

I'm sick and tired of the BS from the oil industry. They're making huge profits and when questioned they respond with excuses about this or that. In the end the prices are high for one reason: Because they can.

I'm also sick of complaints about high gas prices when it seems 1/2 of the cars on the road are inefficient high HP sedans and humongous SUV's. Duh. It's like complaining about sunburn when you're not wearing sunscreen and/or using shade. Do something about it like buy a car with better gas mileage and find ways to drive less like car pool or public transportation.

[Yodrak 7]

Ethanol will make and keep the price of a lot of things high, if the quantities talked about for use in the USA are going to be made from American corn.

Yodrak

Ethanol could keep price of gas high

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[mawilson 2,133]

A push from Congress and the White House for huge increases in biofuels, such as ethanol, is prompting the oil industry to scale back its plans for refinery expansions. That could keep gasoline prices high, possibly for years to come.

Plans? What plans? No major refinery has been built in the U.S. since Marathon's Garyville, Louisiana facility in 1976.

[Jamie76 0]

No new oil refineries built but they have expanded which has in essence added "new" refineries.

The closest refinery to me is the Murphy Oil facility close to Duluth Minnesota. They just recently bought 60 acres of land and they have begun to buy neighboring homes. They are only refining about 35,000 barrels a day but a major pipeline is going in from Canada down to Chicago. Odds are good they will be majorly expanding to take on the extra crude they will have available from the pipeline. About 200,000 barrels a day will be available for them.

BP is also working on alcohol additives to their fuel. Butanol is a better alternative as it has 2 more carbons compared to ethanol. It runs in any vehicle with no alterations, it has a similar energy content to gasoline, it doesn't mix well with water and it can be pumped down the same fuel lines gasoline is shipped...something you can not do with ethanol.

I am in the process of buying a Toyota Corolla. Rather have my truck but when I factor what I pay for gas on a monthly basis, that comes out to about equal to a car payment.

Edited June 18, 2007 by Jamie76

[Hilarious Clinton 452]

They are being short sighted like the American auto industry. High gas prices will all allow alternative energy to expand.