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Gas Pains

With gas prices running above $3.00/gallon of late, a lot of people have been wondering what we can do about it. Some have proposed price controls (such as Hawaii -- hope they don't mind getting a lot less gas in the future), others have denounced the oil companies, and a lot of people just cuss out the sellers.

Our dependency on gasoline -- indeed, on petroleum in general -- is no great secret. It's been talked about for decades, but nobody ever seems to do anything about it. The problem is our entire infrastructure is built around oil, has been for at least a century, and that ain't gonna change overnight. We need short-term solutions, mid-term solutions, and long-term solutions, and we needed to start them a couple of decades ago -- but better late than never.

In the short term, there's an easy solution to cutting down on gasoline shortages. Thanks to environmental laws in the several states, we have no less than 15 "regional blends" of gasoline. That means that we have 15 different "flavors" of gasoline, and it's against the law to sell gas intended for one region in another. We desperately need to cut that down to one standard (or, at the least, get it down as close to one as is possible), so that regional shortages (such as are plaguing the South right now) can be offset by shipments from other areas. As it stands now, gasoline is simply not fungible enough.

The added advantage of this will be to reduce refining costs somewhat, as the refiners can simplify and standardize their operations, and not try to anticipate the demand for gas in various regions, and divvy up scarce refining capacity to suit.

For an intermediate solution, we need to increase our refining capacity. Right now, a huge percentage of our refineries are along the Gulf coast (logically enough), along with New Jersey and the Midwest, along the major rivers. The Pacific Coast has a couple in California, but that's it. It's time to build more refineries, and spread them out a bit. The government needs to start giving tax incentives to refiners to build new facilities, and in places that currently lack them. I'm no expert, but I suspect a big refinery in Washington or Oregon could be used to handle Alaskan oil, or perhaps some offshore drilling off California, for example. And if you want to stick one in New Hampshire, that's fine with me. If the Portsmouth Naval Shipyard hadn't survived the latest round of base closings, that might be a decent possibility.

The long-term solution, of course, is to cut our dependency on foreign oil entirely. Develop more economical ways of extracting petroleum from shale. Work on alternate forms of energy. Use some of the technologies we've already developed, and set aside (wind, nuclear, hydro, and the like.)

Our entire civilization is built upon affordable energy. And we either need to make sure we continue to have access to that, or start looking into alternatives to civilization.

And I much prefer the former.

(Google is a wonderful thing. My work on this piece was tremendously assisted by this page. Who'd have thought that the most accessible source of information about our nation's petroleum infrastructure would be the National Association of Convenience Stores? I think I'll have to go buy an extra ice cream thingie in gratitude.)

Update: RightNumberOne points out that the EPA has lifted the restrictions on regional blends in the South. While that's a good start it's clearly stated that it's a temporary measure -- and we need to make it permanent.


Comments (24)

Jay Tea,Sorry to b... (Below threshold)

Jay Tea,

Sorry to burst your bubble. By executive order, President Bush 3 days ago lifted the environmental restrictions on gasoline blends to address just this exact problem.

I'm searching for a link to the story.

Sorry it took so long ... h... (Below threshold)

Sorry it took so long ... here is a link to an AP report:

http://news.yahoo.com/s/ap/20050831/ap_on_bi_ge/oil_reserve_hk3

Buried about 10 graphs down is the news:

"In the aftermath of Hurrican Katrina, some 95 percent of the Gulf of Mexico's oil output was out of service, according to the U.S. Minerals Management Service. Nearly 5 million barrels of production have been lost since Friday because of the powerful storm and the shutdown of eight refineries.

"It is clear the consequences of the hurricane have become more widespread," Stephen Johnson, the Environmental Protection Agency's administrator, told a news conference.

A day after the EPA announced it would temporarily allow the sale of higher-polluting gasoline in Alabama, Florida, Louisiana and Mississippi, it acted to ease certain restrictions on gasoline blends and diesel fuel in the rest of the country as well.

"This will help take some pressure off the gas price," Bush said as gasoline prices soared toward $3 a gallon in many parts of the country, surpassing that level in some places."

We'd be more likely to see ... (Below threshold)

We'd be more likely to see some new refineries if the oil companies knew that whatver blend of gasoline they start up with will still be legal to sell 5 or even 10 years from now. Some blends are just that, blends, some require different processes take and that can be very expensive to change to.

The long-term solution, ... (Below threshold)

The long-term solution, of course, is to cut our dependency on foreign oil entirely. Develop more economical ways of extracting petroleum from shale.

Funny you should say that. Read this!

Over time the price of comm... (Below threshold)

Over time the price of commodities falls. Temporary rise. Tuesday 2.49.9 in Poca. Wednesday 2.99.9 (3.09.9 at the other station) Saturday 2.89.9
Steve Forbes says $35 a barrel within a year
Shale oil costs too much (I know this because they would be doing this already) and my experience with WV coal is the enviros will go ape over shale oil

Jay,I agree. We sh... (Below threshold)

Jay,

I agree. We should toss the regulations, and the enviro-weenies, into the levee breach.

Not for nothing, but even at $3 bucks a gallon, the price of gasoline has fallen over the last 20 years, once you account for inflation.

I'll let Newsweek carry my water:

"For the price of oil—not in nominal dollars but real, inflation-adjusted dollars—to surpass the record set in January 1981, it would have to be $86.72 per barrel. Last Friday it was $65.35. For headlines about "record" gasoline prices to be accurate, a gallon would have to cost $3.12."

http://www.msnbc.msn.com/id/8897401/site/newsweek/

And also not for nothing, but the amount of gas taxes levied by the federal government and the states accounts for about 20% of the price of a gallon at the pump.

Maybe we should eliminate THAT first.

For headlines about "rec... (Below threshold)

For headlines about "record" gasoline prices to be accurate, a gallon would have to cost $3.12.

In Knoxville, TN it is about $3.55/gallon.

I fail to see how getting r... (Below threshold)
Earl:

I fail to see how getting rid of environmentalists (or "enviro-weenies", as they're called by mature people) helps things. As noted, the restrictions were eased for this crisis, and there's been no complaining from major environmental groups. As Jay Tea notes in his post, alternate forms of energy (long championed by environmentalists) are part of the solution to our long-term energy needs.

Jay:Thanks for a g... (Below threshold)

Jay:

Thanks for a good and timely post.

There are, of course, obstacles to your solutions becoming reality.

Perhaps the biggest obstacle is the Not-In-My-Backyard syndrome.

Due to the NIMBY syndrome, energy companies are limited to where they can build refineries, power plants and other structures that can produce energy.

I wouldn't expect much support for more nuclear power plants until the federal government opens a facility suitable for long-term storage of radioactive waste. Already, the federal government's attempt to open such a facility at Yucca Mountain, Nevada has been delayed by Nevada politicians crying, "NIMBY!"

Keep in mind that, regarding solutions to national problems, what is best at a national level isn't always best at a local level. People these days tend to say "To Hell with it!" regarding something good for the nation if that something requires sacrifice at a local level.

The only problem is that en... (Below threshold)
Johnny O:

The only problem is that environmentalists seem to oppose any and all viable alternatives. Coal, nuclear, increased drilling, more refineries. They are more interested in what they see and feel to be the Earths best interest than what is in Americas best economic and national interest.


I am tired of the complaining about fuel cost increases. I am a Rural Mail Carrier, so I provide my own vehicl and my own gas. Yes the Postal Service does factor in fuel and maintenance costs into my salary but that is not regularly adjusted to account for the increase in the cost of fuel. So I now spend about $75 to $80 a week on gasoline to deliver the mail. Its to be expected. In fact once prices fall back to wherever they fall back to, why couldnt there be a 5 to 10 cent SPECIAL tax(yes I know one more tax) per gallon of fuel to help to cover the cost of restoring NO and the Gulf Coast. Wouldnt that be a fair way..believe me when I say I hate using fair and tax in the same sentence but in this time of crisis I think it would be a fair price for those of us who rely on the Gulf Coast to fuel our economy to pay in order to restore.

right on. <a href="http://... (Below threshold)
blackbird:

right on. Set America Free.

Spurwing,If you do... (Below threshold)

Spurwing,

If you don't think horseradish can be used as a fuel, well then you haven't tried the waffle fries at Fuel & Fuddle.

Mmmmmmmm ... chipolte horseradish sauce.

Them's goooooooooood etin.

The problem with corn (Etha... (Below threshold)
Kent:

The problem with corn (Ethanol) right now is the demand exceeds the supply. E85 used to be 80 cents cheaper per gallon than normal E10 or regular unleaded gas. The difference as of last week from the ethanol refinery 20 cents. Ethanol consumption has more quadrupled (at least regionally - searching for the link) in the last 6 months over what it did last year as more people with flex fuel engines and/or self-blending 50% Ethanol/50% Gas in regular engines.

Jay:There are refi... (Below threshold)
Terry J:

Jay:

There are refineries in Alaska, Washington, Montana, Wyoming, Illinois, Indiana, Ohio, and so on and so forth.

The pipeline system from the Gulf Coast feeds the East Coast from Georgia north. If you can't put something in the pipeline, not much comes out, and those LA refineries have an excess of water and a lack of electricity.

Don't mean to quibble, as most of your ideas are quite good.

I keep saying this to my Am... (Below threshold)
Lizzie:

I keep saying this to my American friends - $3 per gallon is a problem? In the UK we're paying £4.30something, which is about $7.50 at the moment. Two thirds of that is tax. $3 per gallon is a dream for us!

In Knoxville, TN it is a... (Below threshold)
kev:

In Knoxville, TN it is about $3.55/gallon.

Actually, Jeff, it's already down to $3.29. Also heard today that the President of Pilot Oil (who owns a lot of the stations in the area) expects both major pipelines affected by the hurricane to be back at full capacity by Monday.

Not great, but some Cassandras around here were predicting $4.10/gallon gas this past weekend, which spurred some panic buying. I hope the idiots who let them on the local talk shows will have them back this week to ask them what went 'wrong'

Shale oil is also known as ... (Below threshold)
Mac Lorry:

Shale oil is also known as oil sands in Canada, which is already producing about a million bpd from this source. Here's a quote from the Alberta government web site. “Second only to the Saudi Arabia reserves, Alberta's oil sands deposits were described by Time Magazine as "Canada's greatest buried energy treasure," and "could satisfy the world's demand for petroleum for the next century."” Here's the web site: http://www.energy.gov.ab.ca/89.asp

Ethanol contains only half the energy of gasoline. Thus you can expect a significant drop in mileage using E85. Given the energy intensive operations needed to plant, fertilize, harvest and process corn into ethanol, it's not clear there's any net energy gain. Furthermore, about 35 pounds of topsoil is eroded for each gallon of ethanol produced. Ethanol from corn is a jobs program for farmers; it has no future as an energy program. Ethanol from waist biomass avoids these problems.

One idea to get people out of fuel inefficient vehicles is to have a dual speed limit on multi lane highways. Some states restrict large trucks to 55 MPH while allowing other vehicles to go faster. States could issue a special license plates to vehicles with an EPA rating of 25 MPG highway, for example. These vehicles, and all out of state passenger vehicles, would be allows to travel at the higher speed limit, while all other vehicles would be restricted to 55 MPH. If you need a big vehicle to haul or tow, it won't cost you anything except time. But if you drive a gas hog because it's cool, you are going to be in the slow lane and that's not cool. That will be a powerful incentive for people to purchase fuel efficient vehicles without excessively penalizing those who really need a big vehicle.

Federal law should tax the piss out of utilities that burn natural gas to generate base line power. People heat their homes with NG, but the more electricity that's generated from NG, the higher the price. At some point people won't be able to afford NG for home heating and are going to need to burn coal at home using 100 year old technology. That makes no sense from an environmental viewpoint. Better to use coal for power generation where it can be done in the most efficient and clean manner and save the NG for distributed heating such as in homes.

Kent - well then we should ... (Below threshold)
blackbird:

Kent - well then we should open up the ethanol market to imports.
Why in God's name do we tax ethanol from the Caribeean + limit imports when we don't tax oil from Saudi Arabia???

Lizzie: yes, but the entir... (Below threshold)
-S-:

Lizzie: yes, but the entire are of possible drivable land mass for the island of Britain in the U.K. is smaller than, I think, our state of Alaska, even Texas...while my geographical stats may be off, the point is is that Britain does not have the population nor land mass of the U.S. and thus does not have the same, even basic, heating and transportation fuel requirements.

Just saying, if a total drive time to and from the office in the U.K. consists of a few miles/kilometers, and the square footage of the average home is about one forth/third that of in the U.S., then the fuel issue comparisons are immense.

I agree that fuel costs in the U.K. are great, however, I'm just saying that the population in the U.S. is far more dependent upon far more than most. Which is not a good thing but that's the way it is, combined with the "normalacy" of lifestyles here that includes driving as if it's breathing. People here drive everywhere for everything, almost to a man. It doesn't make any sense but that's the standard.

Hopefully, those exceptional consumer standards in the U.S. will change to something more sensible. It would make a big difference in our fuel consumption issues.

Jeff and Kev ... I took a t... (Below threshold)

Jeff and Kev ... I took a trip up and down K-Pike this evening from Cedar Bluff to West Town. Prices are running 3.29 to 3.49 for regular. But many stations are out. Raceway in Solway (60 pumps) ran out Friday night. Weigels will be out tomorrow if another shipment does not come in.

Looking at the price indepe... (Below threshold)
John S.:

Looking at the price independents are charging (they actually own the gasoline they are selling and have to calculate a price daily based on the futures market and distributor quotes) gas prices in N.H. will settle out at $3.69-3.79 for regular this week. The big question is whether they will stay there or go up another buck by Friday.

Sorry to point this small f... (Below threshold)
Darby:

Sorry to point this small flaw out...

Putting refineries on the West coast is almost as bad as putting them on the gulf coast.

First off, we can prepare for hurricanes, even ones as bad as Katrina. That's not all that difficult.

If a BIG one his in California...

No amount of Preparation is gonna help when Cali drops into the ocean.

Semi-OT...No am... (Below threshold)

Semi-OT...

No amount of Preparation is gonna help when Cali drops into the ocean.

I realize that's hyperbole, but the "big one" is supposed to be comparable to 1906 -- which Loma Prieta was in 1989. The scientists were quick to claim that wasn't the "big one" because it didn't happen on the main San Andreas fault line.

Y'know what? I think they're wrong. Pent-up seismic energy was released. A lot of pent-up seismic energy. If there was a "big one" bound to happen on the main fault, that should have set it off. Instead, I think it relieved stress on the San Andreas.

Regarding the UK gas price ... (Below threshold)

Regarding the UK gas price reference: So we shouldn't say anything until we're paying over $7.00 per gallon? No thanks. I'd rather bitch a little to try and keep it from getting there. You say 2/3 of that is taxes? Ahh, the joys of socialism! Hate to be trite, but I'm really sick of hearing Europeans saying we have nothing to complain about. A more accurate comparison would be if your $7.00 per gallon fuel spiked to $21.00 per gallon over the next 3-4 years. Maybe then you'd be a little more sympathetic (read: sensible).

The problem here is that supply has been unrelated to price for some time now. When gasoline first broke $1.00 per gallon, there were countless stations without gas, incredible lines at every station that had it. There really hasn't been a shortage since then--but fuel companies cite a shortage every holiday season and every summer to justify their price gouging during peak use seasons. This isn't the same as an Indianapolis hotel tripling its room rate for Memorial Day weekend--fuel is a commodity, and should be subject to regulatory laws that curtail price fluctuations. In other words, oil companies shouldn't be able to take advantage of supply-demand economic principles simply to maximize profit margins. Furthermore, government should not be taxing gasoline. Imagine the fallout over a federal tax upon every gallon of milk sold. Or if there were a $.20 per board-foot federal tax upon building materials. The federal (and state) governments should view gasoline as equally necessary to life as are food, shelter, and clothing. Without it, people don't work, don't go anywhere to spend money, and the economy flounders.

In addition, the EPA should be dismantled. Period. I've commented before that with automobiles alone, they've done much more harm than good, by mandating power-robbing modifications to engines, making it necessary to build bigger engines, and ultimately burning more fuel. Their opposition to non-petroleum-based sources for energy in the name of reducing emissions from power plants has made us even more dependent upon liquid petroleum--the refining process of which the EPA has made horribly expensive. All-in-all, the EPA deserves the lions' share of the blame for our current fuel dilemma, both on price and supply.




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