Need help : oil prices & "unreasonable" restrictions on refineries

[Patiod]

Last night, one of my Republican friends "explained" to our other friends that "the reason oil prices are so high is because the government has such tight environmental and safety restrictions on refineries that we can build any more, and we don't have the capacity we need.

She went on to add information about increasing demand in China, which I know is true.

Normally, I can counter her conservative statements with facts, but I know NOTHING about oil refining and building oil refineries, and she's a smart, experienced construction engineer, who is (understandably, given her business) on the soap box all the time about govt. regulation.

Anyone know where this comes from, and whether it's true? Anyone have any info countering this?

What's funny is she used to rage about the ADA and how miserable it made her life, until she had a baby and suddenly began to understand the wider benefits of those ramps and curb cuts she used to hate. Not a Freeper, she has been happy to admit to everyone that she was wrong on ADA.

[eallen]

1. From a simple economics viewpoint, that is wrong.

Refineries represent demand for oil, but supply for gasoline. Insufficient refinery capacity and high refinery cost will increase the cost of gasoline, but actually dampen the demand for and price of oil. Ceteris paribus.

[Strelnikov_]

2. My Impression Is That This Is A Straw Man

My response back would be, "What part of the clean air act do you want to repeal, and I assume you plan to buy a house just downwind?"

The reason that refineries are not being built is probably due to feedstock uncertainties due to peak oil. What quantities will be available, and what types, light, heavy, sweet, sour? The initial peak oil crunch appears to be light crude feedstock for gasoline production.

Also, considering that all indications are that the world is pumping at peak capacity, what would be the purpose of additional refineries. Most of the post-peak fossil based liquid fuels production options (coal liquefaction, GTL) yield product that requires little additional processing.

On edit: Just an observation, but from my reading I am coming to the conclusion that the powers in the petroleum industry fully understand peak oil and have a fair estimate of the date (why would BP be calling themselves Beyond Petroleum?). If people are looking for a conspiracy regarding peak oil, it appears to me to be a conspiracy to suppress any discussion of the event to assist in positioning and preserve profits.

[Patiod]

5. Someone did ask her about clean air

and she deftly jumped over it by saying "well, of course we might need some of the regulations, but we're going to have to pay for them."

She knows she's not going to get anywhere with a group made up mostly of moms by saying that we need to loosen clean air standards (even if she believes that)

[trogdor]

7. If they'd quit setting the damn things on fire...

...maybe we'd have enough refining capacity. More than enough, actually. Any other industry that has their processing plants going up in flames as regularly as the oil industry could expect to have a serious conversation with half a dozen regulatory agencies.

[carnie_sf]

3. So, if we allow

oil companies to poison the air we breathe, that will somehow create more oil? I doubt it.

[htuttle]

4. Ask her who's been in control of the government for the last few years

And point out that this year, the Republicans were able to open up ANWR for drilling, an action that the environmental movement has been trying to stop for decades. And the Republicans didn't even have to break a sweat to do it, no matter how much environmentalists tried to stop it.

So with an two oilmen in control of the WhiteHouse, and the Republicans in control of Congress, and with the ability to get legislation like opening up ANWR passed without a problem, if it were true that the only thing keeping the price of gas up is environmental regulations ask her this: WHY DON'T THEY CHANGE THEM? They have the power to do so, if they wanted this -- why don't they do it? (the real answer is given above by someone -- it's because they can't be sure the investment needed to expand refining capacity would pay off at this point).

When they talk about 'the government' make them aware of the fact that they are talking about their own Republican party.

If they say 'market speculation' is at fault for high fuel prices, ask them whether they are in favor of a free market or government controls.

You might also point out that before the invasion of Iraq, we bought millions of barrels of oil from Iraq every day up until right before the invasion. Now we get nothing.

Finally, point out that the dollar has lost 40% against the Euro, and a lost good share against the Yen since Bush took office. That has as much to do with the price of oil in the US as anything. The Euro equivalent price stayed relatively stable until just recently.

They made this bed for all of us -- they are going to have to sleep in it, too.

[Patiod]

6. Thanks for the help! I'm printing all this out

it's not a topic I have a very good grasp on, so I appreciate being able to pose it here and get good answers and not being accused of trolling (I know some trolls pose questions like this, but sometimes I pick up some good talking-points by watching their questions answered and their statements refuted)

[TexasLawyer]

8. There is NO oil shortage

OPEC is sitting on billions of barrels of oil that they could easily bring to US markets. But OPEC members are trying to live off the income from an ever-shrinking dollar. Their dollar-denominated investments have lost tremendous value, and their income from sales of crude loses more and more buying power every month.

Ask your friend why Bush insists upon massive, permanent tax-cuts for his rich friends. Expensive wars, tax cuts, wild trade imbalances and other insane Bushco fiscal policies all drive down the dollar. OPEC used to have a pricing policy that targeted $22 to $28 a barrel. But if the dollar falls, they need to make up for it. The dollar's loss in value hurts OPEC members in lots of different ways.

From BBC News:

http://news.bbc.co.uk/1/hi/business/3590133.stm
<snip>
Weak dollar

When I asked the United Arab Emirates' petroleum minister Obaid al-Nasseri whether there is a new target price, he laughed briefly and said: "No, there is no new target, our target is still as it is."

But he added: "No producer would like to see the price go down, that is clear." And he went on to spell out one reason why Opec members welcome current price levels. "The purchasing power of our revenue is down by 20% or 30% even." That has happened because the dollar has declined over the last three years or so, and oil is priced in the US currency.

A weak dollar is a universal concern among Opec members. And there is a debate about whether the dollar really is the best currency to use for the oil trade.

<snip>

****************

SPECULATORS

Also, ask your friend why Bush continues to ADD oil to the US Strategic Petroleum Reserves. Not only is Bush not signalling to the market that he is ready to put supply onto the market to stabilize prices, which would send a strong message to speculators, he is taking oil OFF the market.

OPEC will pump oil to meet genuine increases in demand (as in China)and keep OPEC income stable and consistent with prior years. But the super-high prices and the spikes in price cannot be blamed on competing world demand. OPEC has made clear it will not pump more oil when super-high price spikes can to a large extent be blamed on speculation in the commodities futures markets. They do not want to create a glut.

***************

From a 4/9/05 Reuters article:

http://64.233.187.104/search?q=cache:6t1gfLV6ot8J:www.dailytimes.com.pk/default.asp%3Fpage%3Dstory_23-3-2004_pg5_13+al+naimi+opec+2005+speculators+reuters&hl=en

<snip>

Algeria’s energy minister Chakib Khelil said he was worried about high crude prices but that there was little OPEC could do to stop prices rising. “Of course we are concerned, as much concerned by high prices as by low prices,” Mr Khelil told Reuters. “We can’t do much to stop prices going up further. We are overproducing above our quotas, most of us. Assuming we are producing at top capacity and prices are remaining high it must be for other reasons,” Mr Khelil said.

Saudi blames speculators: Ali al-Naimi, oil minister for OPEC’s leading producer Saudi Arabia at the weekend blamed high prices on speculators and low US gasoline stocks. Mr Naimi said it was not clear if OPEC would delay the cut. “I don’t know. At the moment no one is in a position to say,” Mr Naimi told Italy’s Il Sole 24 Ore in an interview.

OPEC’s reference crude price has been above the cartel’s $22-28 a barrel price band almost continuously since December and was last valued at $33.01 a barrel. “Prices are higher than the band, but that is because of aspects not under the control of OPEC. If it weren’t for these other reasons prices would be in the $22-28 range,” said Algeria’s Mr Khelil.

OPEC has been leaking supply over quotas to take advantage of high prices, but members fear prices could slump in coming months when demand is forecast to decline after the northern winter. The International Energy Agency (IEA), which advises industrialised nations on energy has projected a large surplus in the second quarter.

[Bridget Burke]

9. Ha! Since she's such a smart engineer, let her come to Texas.

Perhaps she can get a job at the BP plant that recently blew up. Fifteen people died and about a hundred were injured. The Houston Chronicle has had stories every day, pointing out how plant officials were barring government investigators. How the unit that blew had been questionable for a long time. And more. This overview doesn't have all the follow-up stuff, but it can be found at the site.

www.chron.com/content/chronicle/special/05/blast/index.html

Here's a story from yesterday: "If carmakers want to know how many highway accidents there were last year, they can turn to the Department of Transportation's fatality reporting system.

"If airlines want to count plane crashes, they turn to the National Transportation Safety Board's incident database.

But if the chemical and petrochemical industries want to count the number of accidents at their plants every year, there's no one good place to turn."

www.chron.com/cs/CDA/ssistory.mpl/special/05/blast/3129604

The petrochemical industry is woefully under-regulated. Of course, most of the problems only lead to death & injury for employees--blue collar types. Not really a problem for soccer moms.