By Patrick Appel
A reader writes:
Your reader writes: "Sorry to contradict theology with facts, but U. S. refining capacity actually increased by 11% in the last 23 years."
Your reader seems to be omitting an important part of any equation with respect to evaluating US refining capacity decision making by his/her focusing solely on capacity (i.e., supply):
What was the increase in DEMAND over the last 23 years? (Also, one might consider what the forecasted demand increase was, in order to be a bit fairer to the oil company strategic planners).
From Rapier's study:
"The bottom line on the refinery capacity issue is that yes, refining capacity has been reduced at times. And there were perfectly valid reasons that this happened. It is also true that capacity is short at the moment - if the objective is to maintain sub-$3 gasoline prices. But, reduced investment in refining capacity is indeed a key factor behind the current gasoline price spike. If some want to level the charge that refiners failed to accurately anticipate demand growth, then that charge is accurate. But like the rest of us, refiners don't have crystal balls."