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David Nott is a registered professional petroleum engineer, as well as president of the Reason Foundation. In an article in the LA TIMES he discusses some little-recognized causes of high gas prices.
Specifically, we’re not letting the oil companies build any oil refineries:
...no new refineries have been built in this country since 1976; ... On the contrary, since 1981 the number of refineries nationally has shrunk from more than 300 to half that many.
Nott describes regulations that contribute to this tremendous drop in the number of our oil refineries:
The single biggest reason for the decrease in refineries is that extreme environmental regulations make it almost impossible for oil companies to build new facilities. Do you want one in your neighborhood? No one else does either. Never mind that you smell more gasoline at a filling station than at your typical refinery, thanks to improvements in technology and equipment.
Oil companies also want to limit their exposure and liability in overzealous lawsuits and attacks from the Environmental Protection Agency. In 1994, an independent contractor accidentally damaged a pipeline, leaking large amounts of oil into the Skagway River in Alaska. Edward Hanousek, a manager for the project, was off duty and nowhere near the accident at the time. Nevertheless, he was charged with two federal crimes and sentenced to six months in prison. The threat of lawsuits drives refineries, which are at higher risk, out of business.
When the government isn’t prosecuting employees, it is creating laws to make gas more expensive. Regulations requiring reformulated gasoline are making many older refineries obsolete…. As Congress passes pork projects that benefit individual members’ home districts like federal ethanol mandates that put corn-based products in our gas (great for Midwest farmers, terrible for drivers) it makes producing gasoline more complicated and thus more expensive.
I don’t yet have information regarding how much an increase in refineries might reduce gas prices; but I’m pretty sure we’re going to continue to need some oil refineries.
