A Glut Of Oil Refinery Capacity

Americans are driving less. Moreover, alternative fuels, be they electricity or biofuels, will become more common while efficiency of conventional vehicles increases. This article looks at the effect of the VMT reduction, et.al. on oil refineries.

1 minute read

December 28, 2009, 1:00 PM PST

By Irvin Dawid


Remember when President Bush and the Republican Congress were rallying to build more oil refineries to reduce gas prices since no new ones had been built in 30 years?

From Christian Science Monitor, September 21, 2005:

"We need to specifically address our nation's lack of refining capacity and finally do something about it," said Rep. John Sullivan (R) of Oklahoma in a statement last week. "Hurricane Katrina has further underscored the fact that our refining capacity is inadequate."

Those were the days (if you had oil refinery stock). Now the markets have reversed - a glut of refinery capacity has caused many refineries to close, with more to come.

From NYT:

"We have too much capacity," said Lynn D. Westfall, the chief economist at the Tesoro Corporation, a midsize refiner, who estimated that the industry's capacity of 18 million barrels a day must be cut 5 to 8 percent. "We need refineries to be shut down."

"...the (oil refinery) shutdowns are now coming so fast that the United States is losing capacity as refiners struggle to match their output to falling demand. Some energy experts have said that gasoline consumption most likely peaked in 2007, when it reached 9.7 million barrels a day, and will not rise to that level again." (VMT peaked in August, 2007)

Wednesday, December 23, 2009 in The New York Times

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