Many people think that President Bush and Vice President Cheney are profiting with the high price of gas. To some extent, that maybe true, but so do millions of others who invest within their Individual Retirement Accounts. They are not making millions like the Oil Companies. Hey, even my IRA has a percentage of investments in oil. But a smart investor will never put all his money into one area. Just ask any Enron investor.
The problem is that there’s no incentive to build new refinery’s. As it stands now, the Government gets more money…Companies get more…Investors get more…there’s only a few ways to stop it. Consume less, which will never happen. More and more of us are driving everyday. Alternative energies will take years. Or we insist our government thumb their nose’s at the tree huggers, and mandate more oil refineries. I can just hear Sheryl Crow now…”We gotta stop our government from allowing more refineries being built. They’re destroying the planet.” (LOL)

So, when will our government get serious with the oil companies, demand they upgrade and expand refining capacity, and play fair on prices? Only if more Americans demand it from our government officials.

Ref: http://tinyurl.com/yt5vwq

I’d like to discuss two points you make in this article:

First, the transition from largely domestically produced food and goods to a largely import dependent economy does affect the amount of energy consumed.

Second, ethanol production using corn as the input is extremely inefficient; the (petroleum) energy required to fertilize, harvest, and process corn into ethanol is very close to the energy actually produced. Making ethanol from sugar cane yields a far greater energy benefit, but sugar cane is not a profitable or practical crop in the United States for several reasons.

By far the largest increase in oil consumption is due to increased automobile commuting. Gasoline consumption is inelastic in the short term, but highly elastic over a period of several years. If the cost of gasoline stays high for several years, people will select more fuel efficient cars and develop strategies to consume less. I maintain gasoline usage and cost logs for my business and have fairly easily reduced gasoline consumption 21% over 2 years by making small changes to driving habits. I expect this year to be even less because I drive a Toyota Prius for most of my trips.

One variable that suppresses the cost of imported petroleum at the pump is the cost of US military security and protection of oil production areas and tanker protection. This paper in 2005  http://www.icta.org/doc/RPG%20security%2…) posits an annual taxpayer cost of 47 to 113 billion dollars.

This also means that taxpayers that consume less gasoline are subsidizing those that consume more. This actually promotes increased consumption.

I hope this adds light (and not heat) to this discussion.

Marvin

Craig and Marvin, thanks for the comments. Craig, I don’t think we necessarily need more refineries, just increased efficiency and capacity at the ones currently operating.
Marvin, as someone who understands balanced chemical reactions, I do understand your point, but my point is that, ethanol produced here, keeps the dollars here, and also reinforces your first point.
It’s time we had the national will to do better, not just conserve, which I believe most Americans rail against, but do things differently, If we had the will, we could transform vast desert areas to places of habitablity and growth, sugar cane and corn among those things.

Contrary to the money-grubbing theory previously presented, oil refining capacity has actually been most greatly impacted by stifling environmental regulations which have driven the cost of building new refineries beyond the point of profitability. Further, interference by “environmentalist” groups have prevent the locating of new refineries, largely by pressuring local governments to prevent their being built through targeted zoning restrictions — essentially, nobody wants a refinery built in their backyard. With the costs of building and improving refineries having increased by well over ten-fold, and no place to build the refineries, none have been built or expanded in over 30 years. These are your real causes for falling oil refining capacity.

The lobbying of “environmentalist” groups has resulted in new EPA emission standards for refineries which are so tight that the price of refined petroleum products would need to further double to make operation of new plants profitable. This is the real cause for the previously sited lack of upgrades and expansion of existing plants by oil companies. The oil companies would surely upgrade the plants to improve the efficiency of their plants, which would in turn improve their profit margins, if doing so wouldn’t be expensive, due to demolition costs, than building an entirely new plant. Additionally, any modification beyond simple maintenance to an existing plant requires the modified equipment to meet the newer EPA standards. Most Americans’ homes would not meet the EPA stands which are imposed on new refinery equipment.

A huge fallacy running rampant among the general public is the myth that oil companies are making run-away profits because of the skyrocketing price of gasoline. Regardless of what is being charged at the pump, the greatest profiteers in the oil supply chain are the Federal and local governments, who get between 30% and 60% of the selling price of gasoline in their greedy hands from taxes. The oil companies generally only get about 7% of the sale price as profit on their investment. Compare this to other commodities such as clothing, with over 60% of the sale price being profit, furniture at over 75%, and jewelry at over 80%. You can plainly see that oil companies are not making outlandish profit margins in comparison to other industries. Sure, the raw numbers of their meager profit margin are huge, in the billions of dollars, but that’s because we consumers by necessity are buying so much of their product. If we bought clothing as rapidly as we buy gasoline, the Levi Straus’s and Fruit Of The Loom’s of the world would immediately own the entire planet.

If you’re truly interested in fixing the petroleum supply problem, make the EPA regulations on refineries much closer to what can be realistically achieved, and open up more lands to oil exploration. Until that happens, continue to empty your pockets to finance your drive to work.

Something I would like to mention that is never said about the ethanol production from corn. The corn is not all used up when they are done producing ethanol from it. When they are done making ethanol with the corn, this distillers grain is then feed to livestock, as if it was corn, with a higher protein content. So the production of ethanol out of corn is not quite as ineffcient as usually cited.

Having said that, I really don’t know why we don’t use more sugar beets to produce ethanol.

So Rick, I would guess your line of work is Exxon-Mobil executive! Actually, thanks for the comment. I do think that the oil companies operate on the same basis as the President, with a great deal of FUD
[that's Fear, Uncertainty, and Doubt]. Think about this: Unless they are practicing ’slash and burn’ economics, what happens when a refinery blows up, burns down, or otherwise fails? Do they really believe that all other companies are doing the same? Do they all think the current refineries will survive until all the crude runs out?

Phil, I thank you for your comment, and I am aware of this. When I said that I’d defer to someone from Brazil, I meant that they are import oil free, and that should be our goal. However we get to it must become the thing to do.

re your comment on ethanol vis a vis Brazil — ethanol made from sugar cane is 8 times more efficiently produced than ethanol made from corn. in Brazil, all ethanol comes from sugar cane. in the US, we don’t have the right climate or space to grow sugar cane, which is why most of our ethanol is made from corn. … upshot is that because ethanol from sugar cane is actually fairly efficient, the way the Brazilians do it actually makes sense. not so here. — jon

Thanks for the comment, Jon. However, my comment is not based on stoichiometrics, but rather the idea that every gallon of ethanol [or thereabouts] is one less gallon of gasoline we use made from Middle Eastern oil.
Sure, ethanol doesn’t produce as much energy as gasoline, and the ease of manufacture may not be the same, but every dollar that stays here in the United States is better for our economy.

I’m History Channel addict and they had a segment on sugar which basically covered how much we consume here in the US. But right in the middle of all this, they switched over to sugar beet and how Brazil has cut their imports of oil by 80% by running their cars on ethanol from sugar beets. They have been doing this since the 80’s with only one problem noted. Their cars run both gas/ethanol - two different tanks with two injection systems. Seems that during cold weather ethanol doesn’t run well until the engine heats up. So they start the car with gasoline, than switch over to ethanol when the engine reaches normal running temps.

So I am watching this wondering who in the heck is building cars in Brazil that takes advantage of the best of both worlds? A few seconds later they are in a car plant showing these hybrids being build by GM with Chevy front logo’s. :-)

It would seem to me that if the US doesn’t have the right climate for sugar beet production, that there must be some other place in the world that does, and who would be willing to grow the beets for us. Since GM obviously has the technical know how on building the cars, we just need some beet juice!

We may need the expertise of the Brazilians to show us how this is done to avoid what happened to Henry Ford in the 20’s. Fordlandia failed because the Yankees didn’t know what they were doing trying to grow rubber trees.

supply and demand my man.
There haven’t been built any refineries in 20 years.
The best chance is an initiative in Yuma, Arizona to build a new refinery. Looking at all the hoops they have to jump thru to get permits it’s no surprise no other company has tried this. The tree huggers are to blame for this as well. On top of that, the native americans now claim it’s going to be build on ’sacred’ land and are sueing. Bye bye refinery, hello 4 dollar a gallon gas.