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Going Green's No Good for Gas Prices
Push for alternative fuel makes oil companies fearful to expand refineries.
June 18, 2007 — -- Next time you fill up at the pump, think about this: The move toward more environmentally friendly fuels might be pushing up the cost of gasoline.
The big driver behind the current gas price climb is a lack of capacity at the nation's oil refineries.
Building new refineries -- or even expanding existing ones -- is an expensive and time-consuming process. And now it appears that oil companies are also reluctant to do so because of a national push away from their products to biofuels such as ethanol.
Bill Holbrook, communications director for the National Petrochemical and Refiners Association, told ABC News that there are conflicting signals about what path the nation will take coming from both President Bush and lawmakers on Capitol Hill. The president is calling for a 20 percent reduction on gasoline use while some lawmakers are pushing for more biofuels.
If you process gasoline, those in the industry say that none of those developments are necessarily going to make you want to process more.
"If you're a manufacturer in any industry you're going to consider what the implications are going to be 10 years down the road," Holbrook said. "Are you going to make an investment or reinvestment now to expand production …: to continue making a product that some are trying to limit the distribution of."
For the week ending June 8, the U.S. government's Department of Energy Information Administration reported that the nation's oil refineries operated at 89.2 percent of their total capacity, processing 15.37 million barrels of crude oil each day, down 2.9 percent from the same week in June a year earlier.
At the same time, drivers are using up more gasoline, creating an even larger demand and rising prices.
National gas prices dropped on average 6.7 cents in the past week. A gallon of regular unleaded now stands at $3.01, according to the EIA.
This marks the third week in a row that gas prices have dropped in every region of the country. However, prices are still nearly 14 cents, or 4.8 percent, higher than the same time last year.
Building a new refinery is not an easy task.
There are numerous hurdles including securing financing, permits and environmental sign offs. Most communities don't want a refinery and even if they welcome one, getting oil and gas to and from the facility can be a challenge.
The last refinery was built in 1976 in Garyville, La.
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