Mitch Daniels Gives Obama Credit: “He Wanted Higher Gas Prices & He Got ‘Em”

Nan G, we have enough refineries to handle the load it seems… however according to Business Insider (your link), the refineries have chosen to voluntarily shut down some of the facilities because the US consumption is down at the 15 year low.

It turns out, the U.S. is experiencing a bottleneck at the oil refining stage.

On February 23, Bloomberg reported that the U.S. had lost 5 percent of its refining capacity in just the last 3 months.

Over the past year, refineries have faced a classic margin squeeze. Prices for Brent crude have gone up, but demand for gasoline in the U.S. is at a 15-year low. That means refineries haven’t been able to pass on the higher prices to their customers.

As a result, companies have chosen to shut down a handful of large refineries rather than continue to lose money on them. Since December, the U.S. has lost about 4 percent of its refining capacity, says Fadel Gheit, a senior oil and gas analyst for Oppenheimer. That month, two large refineries outside Philadelphia shut down: Sunoco’s plant in Marcus Hook, Pa., and a ConocoPhillips plant in nearby Trainer, Pa. Together they accounted for about 20 percent of all gasoline produced in the Northeast.

The article goes on to note the bifurcation of the U.S. refining industry: East coast refineries that have been refining Brent Crude have gotten squeezed, and have been taken offline, whereas the Midwestern refineries that process cheaper, WTI oil have done okay.

But consumption, and thereby demand, are all related to price of oil and the refined gas at the pump. When the price goes down, the consumption and demand go up.

The problem still lies, as I pointed out in my other post about Obama’s Achilles Heel, with the spare capacity as it relates to the global demand. Were the US less dependent upon ME oil sources, the growing Asian demand would likely be met, even with the limited Saudi spare capacity.