A few weeks ago I wrote about gasoline prices in the US, sharing one of the ideas about why they’re going up: China. Business Week has an article today about gas prices, and why the American public shouldn’t blame OPEC. They should blame the US refineries who cannot refine the crude available, because they’re not set up for it. In fact, the crude reserves in the US are higher than they have been in the past, while reserves of gasoline are somewhat lean, hence the higher-than-normal gas prices of late.
Fact is, OPEC is willing to sell whatever its customers want. And those customers are turning up their noses at the 2 million barrels per day or so of heavy crude — most of it in Saudi Arabia — that OPEC is not pumping now.
Their refineries just aren’t set up to run the stuff. “What can OPEC do?” asks Jamal Qureshi, an analyst at PFC Energy, a Washington, D.C.-based energy consulting firm.
And the U.S. government has had only a tepid take-up on its offer to supply refiners from the Strategic Petroleum Reserve. Clearly, the industry isn’t all that thirsty for crude.
While pointing fingers at the oil suppliers is fun and exciting — as well as being the American Way — in this case, it’s not justified. Oil refineries need to change with the times and build capacity to process heavy crude. Until they do, gas (and home heating oil) prices will remain high. Richard Branson, CEO of Virgin, unsurprisingly wants to start Virgin Oil by building a $2 billion oil refinery. If it would help with the gasoline shortage, I’d be all in favor. Actually, I’m in favor of it anyway just because I admire Richard Branson, and competition in this arena can only be good for consumers.
This recent gasoline shortage isn’t artificially-created, as it has been in the past. It’s real, and it’s created by the US refineries who cannot process what’s available.