JERRY HEASTER:

Refinery capacity runs short

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By JERRY HEASTER - Columnist

Date: 10/03/00 22:15

The preoccupation with tight oil supplies distracts attention from the much more pressing problem of inadequate crude refining capacity.

The troubling reality is that it helps little for OPEC to deliver more oil or the administration to tap the Strategic Petroleum Reserve when American refineries are running at nearly full capacity. Some refineries reportedly have even delayed maintenance to help ensure adequate supplies of heating oil as cold weather nears.

Why is refining capacity short? There are many reasons, and all of them have to do with U.S. society's reluctance to acknowledge the economic concept of trade-offs. It all gets back to the hoary admonition about there being no such thing as a free lunch.

Nevertheless, many Americans think solving problems is as easy as government mandating a solution without the need for any required reciprocal sacrifice in the bargain.

Refineries are, in this respect, a lot like landfills. Everyone knows they're critical to our existence, but nobody wants one in the vicinity of their existence.

The relentless expansion of environmental laws and regulations also has discouraged refinery construction. As a result, no refineries have been built in America for a generation. Instead, the existing refineries have been expanded, but this approach apparently has gone about as far as it can realistically be taken.

Both economic growth and an increasing population have substantially increased the demand for all oil distillate products. The most visible demand surge is related to motor vehicles, which despite fuel economy improvements are consuming 50 percent more gasoline than a generation ago.

Environmental mandates have hindered not only refinery construction but also the production process. Refineries not only are required to produce gasoline for mass consumption, but also have been forced to become boutiques. By one estimate, refineries are now required to produce nine different types of gasoline to comply with clean-air regulations.

With refineries going full tilt and demand steadily increasingly, something has to give. All it takes is a major refinery breakdown to create a crisis, because there currently appears to be no margin for error.

When supply disruptions occur, as they inevitably will in the absence of new refining capacity, it won't do any good to rail against Big Oil. The problem, which no political leader seems willing to discuss, is that Americans have huge appetites for oil products but no stomach for the environmental trade-offs demanded.

However, if Americans want to drive bigger vehicles, live in larger houses and use more-powerful computers, they must come to grips with the fact that there is no escaping the need to encourage construction of more refineries. Less objectionable energy sources are imagined by some as a viable alternative, but this is an exercise in self-delusion. In a $9 trillion economy serving some 275 million consumers, increased use of oil derivatives to meet energy needs is an inescapable given.

If oil's price is high enough to make retrieving it profitable, adequate supplies are assured. The same can't be said of transforming that oil into much-needed products.

Jerry Heaster's column appears Wednesdays, Fridays, Saturdays and Sundays. To reach him, write the business desk at 1729 Grand Blvd., Kansas City, MO 64108. To share a comment on StarTouch, call (816) 889-7827 and enter 2301. Send e-mail to jheaster@kcstar.com.

http://www.kcstar.com/item/pages/business.pat,business/3774cf09.a03,.html

-- Carl Jenkins (Somewherepress@aol.com), October 04, 2000

Answers

Here are some graphs showing the impact
of Y2K on the the nuclear industry and
refinery capacity. The nuclear scram graph
is mine and the oil graphs were done by
L. Hunter Cassells.

The Globe

-- spider (spider0@usa.net), October 04, 2000.