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selfbnd411 -> Ethanol Boondoggle to Cause Skyrocketing Gasoline Prices (6/17/2007 6:26:34 PM)
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I don't buy the argument that refiners are afraid that there won't be a market for gasoline in 20 years--there's near consensus on Wall Street that ethanol is entirely unfeasable. But it does give refiners a great excuse to slash production on a product with inelastic demand, driving up prices and profits.
Still paying the price for Bush to buy the Midwestern corn vote.
Oil Industry Scales Back Refinery Plans
Sunday June 17, 7:27 pm ET
By H. Josef Hebert, Associated Press Writer
Push for Increase in Biofuels Causes Oil Industry to Scale Back Refinery Expansion
WASHINGTON (AP) -- A push from Congress and the White House for huge increases in biofuels, such as ethanol, is prompting the oil industry to scale back its plans for refinery expansions. That could keep gasoline prices high, possibly for years to come.
With President Bush calling for a 20 percent drop in gasoline use and the Senate now debating legislation for huge increases in ethanol production, oil companies see growing uncertainty about future gasoline demand and little need to expand refineries or build new ones.
Oil industry executives no longer believe there will be the demand for gasoline over the next decade to warrant the billions of dollars in refinery expansions -- as much as 10 percent increase in new refining capacity -- they anticipated as recently as a year ago.
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This spring, refiners, hampered by outages, could not keep up with demand and imports were down because of greater fuel demand in Europe and elsewhere. Despite stable -- even sometimes declining -- oil prices, gasoline prices soared to record levels and remain well above $3 a gallon.
Consumer advocates maintain the oil industry likes it that way.
"By creating a situation of extremely tight supply, the oil companies gain control over price at the wholesale level," said Mark Cooper of the Consumer Federation of America. He argued that a wave of mergers in recent years created a refining industry that "has no interest in creating spare (refining) capacity."
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Asked recently whether Chevron Corp. might build a new refinery, vice chairman Peter Robertson replied, "Why would I invest in a refinery when you're trying to make 20 percent of the gasoline supply ethanol?"
http://biz.yahoo.com/ap/070617/ethanol_refineries.html?.v=17
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