Ah..Memorial Day Weekend at last! The ThoughtMarauder welcomes the return of all the great Summer traditions –
Barbecues and Baseball games
Flying kites and Fireflies
Suntans and Swimming Pools
But, sadly, another Summer tradition has returned, as it does every year. No, not Mosquitoes and Sunburns. Something even more painful –
High Gas prices
As sure as the Summer Solstice rising in the East? gas prices have started going up again as they do every year around this time.
Like most of you I’ve always attributed this to oil company price gouging. The assumption is that more people travel during the summer so BIG OIL raises the prices to line their pockets and please their shareholders.
It seems likely enough.
But our assumption is wrong.
Here are a few reasons why –
- Although U.S. oil and natural gas production are at all-time highs, our ability to process the oil has not kept up with the increased output. So what we have is more oil waiting to be processed into gasoline than we have the ability to refine.
2. Many States (and even certain cities within a State) have different air quality requirements that are mandated by law. The refineries must process these specific blends and then store them – in a limited amount of fuel silos –
until they are loaded onto fuel trucks and delivered to their respective cities and states.
3. As you can imagine, processing crude oil into fuel-grade gasoline is a potentially volatile business. Although you don’t hear much about it in the news, refinery fires and explosions happen with unfortunate regularity
further limiting the available supply of gasoline.
The next logical question is “Why don’t we just build more refineries?” The answer is more complicated than you might think.
- The cost of building a new refinery can run into the hundreds of millions of dollars – perhaps into the billions of dollars depending on it’s expected processing capacity. The oil companies have no shortage of cash, but with the encroachment of electric cars and their expected diminution of fossil fuel market share
perhaps it makes more sense to maintain the status quo – and add capacity to existing facilities – than to invest in new facilities that may not be necessary in 10 or 15 or 20 years.
2. As stated, transporting, processing and storing oil and gasoline is dangerous business. Leaks and spills can have a devastating impact on the people and natural habitats surrounding these facilities
so getting the necessary Environmental Impact studies done and meeting all EPA requirements is a long and costly endeavor that, given the aforementioned reason above, may not seem worth it.
The ThoughtMarauder hopes he’s added a little clarity to the current increase in gas prices (about $2.94 a gallon in my Midwestern city) and he also hopes you have a safe and happy Memorial Day Weekend!
ps: put on some sunscreen will ya’…