Friday, June 22, 2007
NIMBY? Surprisingly not.
Listening to Tom Sullivan subbing for Rush ... Tom is saying that the main reason for lack of new oil refineries is regulatory problems and NIMBY.
This was certainly true until a year ago, and I've certainly joined the chorus begging for some relief by government, to get more capacity under way.
But it turns out the oil companies have a plain old market-based reason for their laziness.
Ethanol.
The numbers speak for themselves.
Gasoline production from US oil refineries is 136 million gallons per day.
Ethanol production right now is 13 million gallons per day.
Total demand is expected to rise to 161 mgpd by 2017 (ten years from now)
Based on plans to build more plants, etc, ethanol production is expected
to triple over the next ten years, which will take up all of that increased
demand.
So even if the feds broke through the legal obstacles, oil companies wouldn't have a normal economic reason to increase their capacity.
I must say, this fact makes me more sympathetic to the Brand-D attempts to impose some kind of windfall profit tax. If there is never going to be a reason to build more capacity, the whole justification for huge profits disappears. ¶ 10:03 AM
This was certainly true until a year ago, and I've certainly joined the chorus begging for some relief by government, to get more capacity under way.
But it turns out the oil companies have a plain old market-based reason for their laziness.
Ethanol.
The numbers speak for themselves.
Gasoline production from US oil refineries is 136 million gallons per day.
Ethanol production right now is 13 million gallons per day.
Total demand is expected to rise to 161 mgpd by 2017 (ten years from now)
Based on plans to build more plants, etc, ethanol production is expected
to triple over the next ten years, which will take up all of that increased
demand.
So even if the feds broke through the legal obstacles, oil companies wouldn't have a normal economic reason to increase their capacity.
I must say, this fact makes me more sympathetic to the Brand-D attempts to impose some kind of windfall profit tax. If there is never going to be a reason to build more capacity, the whole justification for huge profits disappears. ¶ 10:03 AM
