How high gasoline prices?
Here we go again with gasoline prices going through the roof and our brilliant Congress looks at the stars and can only hope that the sky will not fall on them. I was privileged to hear a former President and Chairman of the Board of one of the major U.S oil companies at a Rotary Club meeting in March of 2007. He pointed out that refining and marketing were in the past low profit sectors. The price of crude oil is roughly 75% of the price at the pump. Oil prices are set on N.Y. Mercantile exchange and not by the oil companies. The increased demand for oil is affected by China and India and the Oil Ministers that can restrict production. OPEC has a price objective for crude of $60-$70. The EPA took aim at refineries years ago and because of low profitability, 1/3 of the U.S. refiners went out of business. The USA has not build a new refinery in 30 years. The enviromentalists, in halting new refineries have helped the profits of the refineries and have contributed to greater profits for existing refineries. The prices of crude oil traded on exchanges is influenced by things like refinery fires and excess or surplus inventories of crude. In California, prices are high due to a large demand, restricted supplies, old refineries and no new ones permitted, no imported gas, nor new pipelines. As a result, California has the most profitable refineries in the USA. Yes, there is price manipulation in the world, but not in the USA. Most service stations are independently owned. The most profitable sector is the production sector.
Why have we not addressed the problem of importing close to 60% of our crude? We had a chance to drill in ANWR but Bill Clinton vetoed the Senate approved bill in 1993. The idea has come up again but Democrat Senators were able to kill it. We cannot drill off shore in many cases and the Sierra Club is quick to halt any future drilling in ANWR and elsewhere. In other words, we are at the mercy of the oil sheiks, Venezuela, Mexico, Nigeria and others. Can you imagine what we would do if a world war stopped all of our imports? Do you think that maybe we would start to find additional sources of crude oil or would we just roll over and die? Solar, windmills and ethanol will help but for the foreseeable future, we need of course better mileage cars and a consistent and secure source of crude oil.
Gary E. Marsella