According to rightists, the second-most common response to energy crisis, behind “Drill! Drill! Drill!”, is that gas prices are high because environmentalists have prevented America from building any new oil refineries in 30 years (or whatever duration it is).
How does this claim square with marketplace reality? According to an oil industry executive, it doesn’t:
U.S. refineries will continue to run at current reduced utilization rates in the next few years due to slowing demand for fuel, a ConocoPhillips executive said on Wednesday.
“Utilization rates have come off from their highs of the last few years… we expect this trend to continue for the next few years,” James L. Gallogly, ConocoPhillips executive vice president of refining, marketing, and transportation, said in a presentation to market analysts.
So at a time of record high gasoline prices, refineries have not been running at full capacity?
Refineries had been operating at an average above 90 percent of capacity, but this year refineries have been operating at much lower capacities nearer to an average of 85 percent, according to Gallogly.
Why have refineries slowed down? (Emphasis added)
Historically, utilization rates peak during the U.S. summer driving season to meet demand, but this year, refineries failed to ramp up production due to poor profit margins and weak demand.
Ahh, there’s a key phrase rightists never seem to mention: profit margins.
Unlike rightist pundits, I’m not going to pretend to be an oil industry expert, when I’m not. Perhaps we should build a refinery somewhere. But clearly there are more factors to the this economic equation (e.g., industry consolidation and profitability) than simply the evil environmentalists scapegoats that we always hear about.
The most telling part of the story was the name of the refinery operator: PhillipsConoco. The oil-i-gopoly is to blame for high oil prices. We need the federal government to run in an smash some of these trusts. These mega-mergers have brought on this problem.
The way capitalism is supposed to work is this: when gas prices increase, investment moves into the market to capitalize on the prices. There is competition, and the price drops. This isn’t capitalism if people are purposely trying to impact the market.