Domestic sources of oil could help reduce gas prices

Records are being broken in both the price per barrel of crude oil ($40.77) and the price per gallon of gasoline ($1.90 in Clovis on Wednesday), raising fears of inflation and economic slowdown, as well as grassroots calls for a national gas-buyers boycott. And so the political jousting naturally continues over who or what is to blame.

Liberals have lined up their usual list of suspects, including greedy oil executives, price-fixing gasoline distributors and a president who could spare us these prices, they say, if he would just bully members of the OPEC oil cartel into boosting production and tap into the Strategic Petroleum Reserve (SPR).

Largely ignored in the frenzy of finger-pointing is the part played in higher prices by over-taxation, over-regulation and the continuing refusal of many Democrats to endorse more development of domestic sources of natural gas and oil, including in the Arctic National Wildlife Refuge.

This debate became particularly heated in a Senate hearing room last week, when representatives of energy companies attempted to explain the role federal and state regulations were playing in the price hikes. Domestic refining capacity has dropped from 18.6 million barrels per day in 1980 to 16.8 million barrels a day today, even while demand for gasoline has risen relentlessly, the president of the National Petrochemical and Refiners Association told senators.

The number of U.S. refineries in that time dropped from 321 to 149. A new refinery hasn’t been built in the country since 1976. That means roughly 10 percent of the gasoline Americans consume is imported from Canada, Venezuela and the Caribbean, where a raft of costly U.S. regulations don’t apply.

“Simply stated, the environmental compliance burdens placed on the nation’s domestic motor fuel refining industry over the past 20 years have effectively destroyed the world’s most efficient commodity manufacturing and distribution system,” added a representative of the Society of Independent Gasoline Marketers of America.

Federal and state laws require that more than 300 blends of “boutique” fuels be produced, sometimes literally changing with the seasons. This effectively is “Balkanizing” the U.S. market in a way that drives up production costs and prices.

But Democrats on the Senate Environment and Public Works Committee bristled at suggestions that their beloved federal government or the country’s regulatory climate could be a factor. California Sen. Barbara Boxer brandished a 2-year-old study, conducted by California’s Environmental Protection Agency, which found that state gasoline regulations added “only” 5 cents to the cost of each gallon of gas. That proves, Boxer said, that “environmental regulations are not the reason gasoline prices are skyrocketing.”

But that 5 cents (if you accept the estimate as accurate and up-to-date) represents only the cost of state regulations. Add on a panoply of federal regulations, plus excessive state and federal gasoline taxes, and the government is unquestionably taking a healthy bite at the gasoline pump. And if Boxer doesn’t believe inadequate refining capacity is part of the problem, why is she pulling out all the stops to prevent Shell Oil Co. from closing a refinery in her state?

Boxer and other Democrats consistently oppose drilling for oil in ANWR, arguing there’s only enough there to supply a fraction of the nation’s needs. Yet she is trying to prevent the shutdown of a refinery that produces just 2 percent of California’s gasoline and 6 percent of its diesel fuel. In this case, it seems, she understands that a relative little can make a big difference.

Committee Chairman Jim Inhofe, a Republican from Oklahoma, seemed to see the connection. “It is critical that the American people realize that our environmental regulations are not free, but have a very real price,” Inhofe said, brandishing a five-page list of environmental laws applying to refineries. Inhofe said they help explain why building a new refinery would today take an average of five to seven years and $2.5 billion.

Yet we’ve heard only vague references to such matters from Democrats, and no talk whatsoever about suspending or repealing the regulations or taxes that are pumping up gas prices. No one says hyper-regulation and excessive gasoline taxes are the only reasons for rising prices. OPEC market manipulations, economic booms in China and India and political instability in a number of leading oil producing nations also help explain why world oil demand is outpacing supply.

But given the limits to what we can do about many of these external factors, it would seem sensible, when looking for ways to get some short- to mid-term relief, that Americans begin the search for solutions here at home.