US Refinery Capacity

This happens each and every year at about this time:

US politicians continued their assault on oil
giant BP with demands to know why two of the oil company’s biggest
refineries are operating at half capacity right before the start of the
peak summer driving season.

Senator Pete
Domenici of New Mexico, the ranking Republican on the Senate Energy
Committee, asked BP America chief executive Bob Malone to explain why
BP’s enormous refineries in Texas and Indiana are not running at full
capacity.

"Texas City and Whiting, Indiana,
are two of the five largest refineries in the United States, and the
American people rely upon the [petrol] from these facilities," Mr
Domenici said.

He has formally requested an
update on the status of the two refineries and told Mr Malone: "It is
essential that our nation’s refineries are fully functional and
operated in a safe and effective manner."

Every spring gas prices rise in the US. It could be, of course, that the oil companies are indded pricesetting, milking the consumer. It could also be that the legally required changeover from winter to summer fuel blends means that refining capacity must be taken offline, thus creating a supply disruption.

So I for one call for a full inquiry. Let’s find out what is causing this annual surge in prices shall we? The oil companies or the politicians?

3 responses

  1. Philip Hunt Avatar
    Philip Hunt

    I find it bizarre that the USA has separate legally-mandated blends of summer and winter fuel. Bizarre because the USA is a big place with large variations in climate; a fuel suitable for Alaska temeratures probably isn’t gonig to be so suitable for Florida temperatures.
    Do you have any more information on this, Tim?
    Tim adds: There are, as well as the summer and winter blends, a patchwork of other regulations. Different states, different areas within them: the LA basin, for example, has a different blend from other parts of southern California.
    Certainly it’s true that the US is not a national market for gasoline.
    Best idea would be to trawl through the archives of Lynne Kiesling’s blog, “Knowledge Problem”. She’s an economist who works in this area.

  2. Agammamon Avatar
    Agammamon

    We even mandate by county and even city.
    A city near my home town, Pheonix, AZ, has a different blend of gas than its surrounding county – a couple of years ago when the pipline into that place broke, the governor had to work to temporarily relax the requirements so that Pheonix could get enough fuel. We couldn’t truck it in fast enough from the refinery and the local suppliers couldn’t legally sell them their gas.

  3. Different areas of the world use different blends of gasoline depending upon the climate. It’s similar to the use of various weights of motor oil available for different climates.

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