Reason’s Adrian Moore discusses the binding constraint that is refinery capacity in the US in a commentary from the Orange County Register. Very good summary and analysis.
Just a few new refineries would alleviate the problem and help keep our gas prices lower and steadier.
But getting an oil refinery built is next to impossible, hence the 30-year construction drought. There will always be environmental activists who fight any new proposed refinery, regardless of where it might be located and how environmentally safe it is. And our environmental rules give them the upper hand.
The environmental impact-report process mobilizes the “not in my back yard” elements to oppose any proposed refinery, but it does not mobilize people or groups who are looking at national energy needs. You wind up with a very lopsided discussion where potential problems are thoroughly and perhaps overly represented, but the only group pointing out the benefits of the refinery is the “evil” oil company asking to build it – even though every automobile driver would benefit.
Consider the example of Arizona Clean Fuels, which has been trying to build a small refinery outside Yuma for almost 10 years. It took five years just to get air-quality permits. Now they hope to be operational in 2010, 15 years after they started the project.
Adrian also mentions that technological change has made modern refineries more clean, which changes the production/emission tradeoff that has informed the absence of new refinery construction over the past 30 years.