With refineries overloaded trying to meet demand, why can't we build more refineries?

Question

Supply and Demand dictates that prices will continue to rise with demand and soon some areas may not get any. We need to start building and drilling now or shut up about the price of gas.

Answer 1

eco terrorists like algore have vowed to stop the building of any more refineries no matter what it takes or how low the supply gets.....the needed permits would be tied up in court for tens of years....as long as algore and greenpeace and the state of Ca exist there will never be another refinery built here

Answer 2

Refinery capacity is not the problem; declining oil supply & production is the problem.

The entire world's remaining oil reserves are estimated to be less than 50% of the original total. We've already used up about +1 trillion barrels, and there are an estimated 1 trillion barrels or less remaining. We are now or past the half way point. An estimated +95% of the world's oil has already been discovered. This is why since around year 2000, oil companies are spending less & less every year on exploration, and more on extraction technology & alternative energies. (Check the stats, I forget the precise figures.) All the new oil fields are in hard-to-reach, expensive, energy-intensive places, like offshore deep sea reserves (Gulf of Mexico), or oil sands (Canada), or oil shales (Colorado).

When global supply is shrinking & headed towards zero (between 2030-2040), why would you build more refineries???

Global demand is at around +85 million bpd, and growing at 2%/year. Global supply production is currently around -85 million bpd and DECLINING at 2%/year. This is why oil prices have been steadily climbing year over year, as supply is becoming difficult to meet demand.

You may ask, how can production shrink if there are still 1 trillion barrels in reserves? The problem is, as all the older, larger, easier to access, high quality oil fields are drying up, the newer, smaller, harder to access, lower quality fields that come online every year are NOT enough to replace the loss.

They are already drilling as much as possible - who wouldn't, at $65/barrel? It is actually in the interests of oil producers to prevent prices from climbing too high, since high prices have the serious potential to create "demand destruction", causing buyers to seek alternatives, which collapses prices & profits. This is what happened in the oil crises of the 1970s, which incidentally, caused a major economic depression.

This depression will occur again, as oil prices climb higher - and stay permanently higher. The only way prices will go down is if global demand drops dramatically - which is unlikely to happen.

Just Google "Peak Oil".

Answer 3

You are correct about the supply and demand aspect. However, you failed to mention the cost of building more refineries. When supply vs demand drives the price of gas up enough to the point where it will be near immediately profitable, then the companies will build. The only other chance of more refineries being built, is if the gov't give the companies tax incentives for them.

Answer 4

Over the last 15 years, oil companies have closed refineries, not built them. It's not hard to see why--by creating artificial shortages, they can jack up the prices.

The law of supply and demand operates when there is a free market--and that is NOT the case in the oil industry.

However, in the long run, it's irrelevant. Alternative energy and fuel-efficient cars will solve the problem just as fast--and will be better both for the economy and the environment.

Answer 5

The normal dynamics of a free market means that as prices rise, suppliers will create more product while consumers take action to control consumption. The market tends over time to equilibrium at which point the market clears. The oil market is no different. Consumption has increased with little corresponding growth in supply. Oil suppliers find it too difficult to go through the regulatory process to create new facilities, so they tend to expand production in existing refineries. Foreign markets are dominated by heavy regulation and oversite, resulting in little capital investment available for growth. Mexico is a classic example of that scenario. Nationalization of the industry in other countries, especially Venezuela, are going down the same road. Pre-Chavez saw 3.1million barrels per day produced. Now, their production is down to 2.6mbp.

Relief will come as prices rise and alternative fuels become competitive. Hopefully, economies won't suffer much in the process. Fortunately, energy as a percent of overall spending has been falling. But, I haven't seen any recent numbers on that.

Answer 6

The same reason why they stopped carrying reserves - since they can manipulate supply so readily, they can maximize profits under the current system.

If there were more refineries on line, then there would be honest market competition and supply and demand forces at work, and they couldn't gouge consumers at will.

Answer 7

We are being Manipulated and Exploited... Intentionally.The
simple reason they don`t want to build more refineries.
The biggest reason they don't have the money?Right?
environmental issues ??phooey. Government restrictions?
That is a laugh.. You give someone a club and they will
beat you with it. What we gave them was our demand for oil..