Oil prices, gas prices, and refineries

Separately, DetNews had an excellent article on the economics of gas. They noted that the key issue for gasoline is refining, not the price of oil. They also pointed out that many oil refineries are currently running at a loss.

Yes, you heard right. Some of the refineries that produce our gasoline are running at a loss. That, better than any lunacy about how environmentalists are in control of the Bush Administration, (which is every bit as likely as Jerry Falwell running the Democratic Party, especially now that he’s dead), explains why there have been no new refineries constructed over the past decade. In fact, some years ago a major gas company closed down some refineries, because they weren’t making their target profits - and at that point, they weren’t even losing money.

One who is either paranoid or has a good memory of oil company shenanigans might think that ExxonMobil is doing its bit to shove some competitors over the edge, and perhaps into its gaping maw. ExxonMobil, you see, is doing very well in this climate, because they do quite a bit of drilling in addition to refining. Companies that mostly refine are probably losing money now; those that mostly drill are probably quite happy.

But what about antitrust law, you may ask? Do you remember a few years back when Microsoft was found guilty of violating such law? Do you remember the penalty? I’ll remind you, if not — they were made to promise not to break the law again. (This wasn’t their first offense, either.) There were a few more penalties, but none so vicious as those you would get for stealing a stick of gum, or parking in a handicapped space.

This article both shows why the price of gas won’t rise in a linear fashion with the price of oil - and why new refineries are unlikely to appear any time soon. It also shows why combining trips, driving with fuel efficiency in mind, and, yes, considering gas mileage when replacing a car, along with such apparently unrelated thoughts such as not buying unnecessary plastic toys, shutting off unused lights, and enabling Energy Star on our computers, are terrific ideas.