More demand, less capacity

We’ve evidence this week that fuel prices can drop just on a rumor.  “Amid rumors that the US and UK would dip into their strategic reserves, the price per barrel dropped $2 a barrel overnight.”

While the Obama administration is deliberately blocking our internal production, even the rumor of a change in policy can dramatically affect the price per barrel of crude. 

Instead of looking toward regaining the stability of our supply in a dangerous world, our government is doing the opposite.

“…we are the only major nation to deliberately limit domestic oil production even as war clouds and unstable governments place foreign sources in jeopardy.” — Investor’s Business Daily.

Now we have information that two major east coast refineries may soon close.

Half the refining capacity on the populous US east coast is set to disappear. Sunoco has pulled the plug on two refineries already and warns that another in Philadelphia will close in July if no buyer steps forward.– UK Financial Times.

What we’re seeing is that even if the US opens exploration and drilling, we won’t have the capacity to refine that additional oil.  The lack of refining capacity will be as serious a situation as the lack of oil to be refined.  The refineries are being squeezed between the increasing delivery cost of the basic product, lowered demand due to the higher costs of that product—gasoline and diesel fuel, and NIMBYs and liberal environmentalists anxious to close the refineries and block the construction of new, more efficient replacements.

In short, it’s a negative feedback loop. Lower usage, higher costs means refineries can’t meet minimum margins and are closed.

We applaud when we hear, “Drill baby, drill!”  We will not meet our fuel requirements if there are no refineries to process that oil.