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Dry at the Pump

Continuing closure of Northeast oil refineries raises risk of short supply, higher prices, even national security.


By Arthur H. Gunther III
thecolumnrule.com
columnrule.blogspot.com

Though gasoline pump prices have jumped about 50 cents per gallon in recent weeks, the real worry is not about price but supply. In high-demand periods such as summer, and in transport disruption as occurred  during the recent storms, shortages will happen, worsened by panic buying.

It was just last April that CNNMoney reported that nearly 50 percent of the refining capacity on our East Coast has either ceased operation or would do so soon. The claim is that the older operations are losing money because they cannot efficiently (read profitably) refine cheaper, heavier types of crude from oil sands in Canada, Saudi Arabia, Venezuela and other places.

Analysts are concerned, CNNMoney reported, that there will be insufficient tanker, barge and pipeline delivery to Northeast markets.

This is a matter of national defense, for the homeland cannot be secure without dependable gasoline and other refined oil supply. The economy would be jeopardized, as would government operation. People would, of course, panic and snarl what supply lines do exist. Heating plants in homes and in public and private business would shut down.

If no investment is made by the oil companies in East Coast refinery replacement, if the focus is again only on the short-term bottom dollar, as has been the case for at least 20 years in American business, our area will face sure supply disruption.

Yes, tankers can bring in gasoline from refineries on the Gulf Coast, Europe or Newfoundland, but they must arrive in an endless supply chain. The famous D-day invasion was almost stalled and reversed by weather-related supply disruption. Imagine what even a mild storm could do to interrupt delivery of gasoline.

And terrorists might easily take advantage and interfere with international shipping.

Of course, speculators already see the opportunity here. The major Wall Street muscle that is behind such speculation drives up prices for quick investor profit without any hint of conscience over suffering Americans. These speculators do not even take delivery of the gasoline and other refined oil. There should be no speculation in any major commodity market since greed is the key motive, not the public welfare.

Congress seems unable to handle even the most mundane matters, let alone this brewing crisis. Budget sequester and its economic fallout lie ahead, and maybe that’s good in a sinister way since if we have less money to spend, we won’t run out to buy gasoline that may not be had at any price.

Where is our leadership?

The writer is a retired newspaperman.


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Ann Fanizzi February 27, 2013 at 11:57 AM
There is some who believe that the more we drill, the more oil we will have and the price of gas will go down. What is not recognized is that the oil goes on the open global market and we are at the mercy of whatever price and market forces prevail. Remember Washington's admonition on "entangling alliances." We are absolutely entangled.
Ross Revira February 27, 2013 at 12:30 PM
The single largest force we are subjected to is the " law of supply and demand". That is a difficult concept for some people to comprehend because they believe in a "command economy" as opposed to a "market econmy".
art gunther III February 27, 2013 at 12:56 PM
Today, the "law of supply and demand" has been corrupted, manipulated by commodity speculators (ironically the very banks and Wall St. firms we bailed out) who never take delivery of the product, who computer trade within seconds for quick profit. Even in oversupply, they can and do price according to "futures" based on often overblown factors as an upcoming snowstorm or a loud voice from the Mideast. This speculation is largely about greed, not supply and demand. Legislators do nothing, with many campaigns funded by special-interest lobbies tied to Wall Street, etc.
Ross Revira February 27, 2013 at 02:27 PM
There has been and always will be forces that will alter the supply and demand theorem in the short term. Crude goes up when the world economy is strong and plummets when it is weak. Proof in point was the price drop during the “great recession”. Do not confuse the price of crude on the world market with the price of refined products the consumer buys. The biggest factor in gasoline prices after crude costs is refining capacity. In the US oil refineries have been running at a level above 95%. To make matters worse there has not been a new refinery built in 30 years. There is no excess capacity to meet spikes in demand or from refinery shut downs. This is the result of the government caving in to various environmental groups bent on ending the use of fossil fuels. Another cost contributor is the mandated requirement to blend many different kinds of gasoline for a particular season and locality. One size does not fit all. So when it is all said and done $5.00 gasoline is the result of the government and their willing accomplices trying to change the American lifestyle. Are the evil Wall St. bankers behind everything?
art gunther III February 27, 2013 at 03:56 PM
Yes, Ross is correct about many forces at work here, including failure to renovate refineries and even some environmental logjam. But sound energy policy has not moved in a sustaining positive direction under either Republican or Democratic administrations and Congresses since 1970. There has been a failure of leadership in every decade. As for "evil bankers," no reasonable person could use that term. Yet what we are seeing today with the accumulation of super speculative profit is utter greed. There is absolutely no responsibility toward the consumer pocketbook. If the middle class in particular continues to shrink from this sort of greed, our democratic nation is threatened. No democracy long stands, and cannot thrive, without the middle class and its hopes and the hope of others to be in it. Where is the investment by Wall St. in that?

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