Might I offer a suggestion for how to make people feel better about the oil companies’ multi-billion dollar quarterly profits and perhaps do a little planning for the future when their profits aren’t as good.
I am not sure what words the legislative branch would use but instead of forcing the Oil Cos to pay wind fall taxes, they would mandate environmental and capacity improvements to existing refineries. Then as part of a national security bill enact legislation that would require the oil companies to build new refineries. The importation of refined fuels is very costly, and leaves the country in a vulnerable position.
According to the DOE website the USA imports 1/9 of the gasoline it uses, and that amount grows by the day (more than a million barrels a day.) In certain parts of the country, like the Northeast the majority of the gasoline is imported, so reductions or delays in shipping can have a significant localized affect on prices. However, the whole country is at risk, if you think prices are high, imagine how high they would go if 1/9 of the gasoline supply became unavailable. Now if we used closed military bases and tax incentives to build 1 or 2 new refineries a year for the next 10-15 years, the USA would be in a better position to meet its own fuel needs and have enough export to the rest of the world.
Sure people hate refineries but they are a necessary evil of our modern life style. They also provide stable jobs, which many communities around the USA need desperately. Yes, $4 a gallon gas has reduced demand, but it will creep up again, if it doesn’t our economy is in deep trouble. (Energy use is an indicator of economic health.) To prevent a cycle of economic doldrums like we saw in 2005 caused by the price spikes from Rita and Katrina supply and demand must be better balanced. Even with use growing at very modest 1% a year, the fact that refining capacity only grows at 0.8% a year means demand outstrips supply. This 0.2% discrepancy might not seem like much but it is am important problem, one that has been growing since 1981 when the last new refinery came online. The USA has almost no spare refining capacity, so doesn’t matter if massive new oil reserves are found, if it can’t refine it into gasoline, plastic, and everything else that requires oil, it really won’t help prices. Until the USA has 2-4 refineries worth of spare capacity equally distributed across the country (at minimum), supply and demand will be next to impossible to balance. These 2-4 refineries won’t be idle just waiting to be needed they will be creating exports, to help balance the trade deficit.
Well what about biofuels? Biofuels are not going to replace fossil fuels in the next 30 years. (That is unless the oceans can be extensively farmed, or a technology that can desalinate water at next to no cost is invented.) Plus biofeed stock for the chemical industry is far less advanced than biofuels, so oil is still the first choice. This means for the next 40-50 years we are going to need refineries and the ones built in the 1960s and 1970s are going to start reaching the end of their planned lives soon. Sure they can be kept going but in a market where every drop of capacity is needed for stability, the increased downtime required for maintenance and upgrading of old facilities is going to be an increasing problem.
You will note that my first suggestion was things that would require downtime. (Which I just said is bad.) Many refineries are “landlocked” since the cities they serve have sprawled and engulfed them. Without access to new land the refineries have had to grow in a confined volume. Well this is the prefect market for industries that don’t make good neighbors to buy more land. By adding available land, the refinery can add capacity and make environmental improvements in the new area with minimal disruption to capacity. Once the new section is online, the old section can be upgraded too, again with minimal disruption. By setting aside some of the new land as wilderness or green islands and planting trees where houses once stood the refineries can mitigate their impact on their new neighbors.
Exxon, Valero, etc have not sat still; they have been improving technology over the last 30 years. However, these technologies have been retro-fitted into old refineries; in a new refinery where everything is built to work together these technologies can shine. This means the next generation refinery will be a totally different animal when compared to the ones they built long ago. Yes, new refineries will still smell and be ugly, but the alternatives are far less attractive.
Punishing an industry for doing well is un-American. Expecting the industry to reinvest some of its good fortune by making infrastructure improvements, for everyone’s benefit is. For those in the oil industry that remember the bust of the 80’s, times have changed significantly. Yes $20-30 of the price of a barrel could disappear overnight with regulation, (like a law saying you can not buy a commodity unless you can take delivery of what you buy*) and a strong dollar could erase another $20-30 of the price, but demand from the developing world should keep prices above $60 a barrel from now on.
*That might not sound like a big deal, but to make a good profit you have to buy and sell lots of oil, and having capacity just to store a thousand barrels is expensive. Plus the EPA and local and state ordinances about transporting and storing hazardous materials (fees, impact studies, emergency plans, etc) will make it a serious impediment to all but a few speculators.
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