Would More Refineries Lower Gas Prices?

Aug. 16, 2005 — -- There are 149 refineries in the United States, and the strain on them is showing. Months of operating at nearly full throttle -- trying to satisfy record consumer demand -- has produced a summer of fires, accidents and shutdowns.

"Refineries are strained, and they are having more accidents and creating worries about supply shortages that drive up the price," said Jamal Qureshi, an oil analyst with PFC Energy.

The system is so stretched that 10 percent of the nation's daily diet of gasoline must now be imported.

"Everybody has come to recognize in the last six to eight months that there is a significant shortage of refining capacity in this country," said Glenn McGinnis, chief executive officer of Arizona Clean Fuels.

Oil analysts say more refineries could make a difference in gas prices, especially if they were able to process what's called "heavy" crude.

Heavy crude is harder and more expensive to refine than "light" crude, but it's also $14 a barrel cheaper, and there are millions of barrels for sale.

But right now, less than a third of the nation's refining capacity uses heavy crude.

"The optimal scenario would be to build a lot more of these refineries that can process heavy crude," Qureshi said.

Analysts say just a few new big refineries could produce enough extra gasoline to make a dent in prices. But building even a small refinery in the United States is a monumental task -- just ask McGinnis.

He's been trying to build a refinery on a patch of Arizona desert for a decade, and at this point hopes to be operational in early 2010. It's taken five years to get the air quality permits -- the site had to be moved from Phoenix to Yuma -- and they still won't break ground for another year.

"By the time we're completed, it will have been 15 years since the project really got started until we got product to the market," McGinnis said.