Katrina Reveals Gas Price Folly-Environmentalists, NIMBYs Have Blocked New Oil Refineries for 30 Years

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With oil and gas production in gulf states at a standstill in the wake of devastating Hurricane Katrina, oil prices hitting a record $70 per barrel, and an average gasoline price of over $2.60 a gallon, the Bush administration has decided to tap the nation’s Strategic Petroleum Reserve.

The move comes amid numerous predictions that gas prices will shoot up over $3 per gallon throughout California this Labor Day weekend. Bloomberg News reports that Katrina forced the temporary closure of at least eight refineries, responsible for as much as 10 percent of the nation’s oil production.


The ongoing fallout from Katrina sheds light on our woeful energy policies, demonstrating that we are so vulnerable that even a temporary shutdown of oil refineries in one corner of the country will have a huge impact on gasoline prices across the country and in California.

Why? Supply and demand. And not simply the supply of oil we get from the Middle East, Venezuela, and others.

A new oil refinery has not been built in the United States since 1976. During that time, our gasoline use has increased over 25 percent. The nation’s 149 existing refineries have been running at maximum capacity trying to meet record demand and, as a result, not only do we import oil, we actually have to import 10 percent of our daily gasoline from refineries overseas.

So when Hurricane Katrina or a refinery fire or anything else causes even just a few refineries to shut down for awhile, there is absolutely no excess capacity nationwide to make up the difference, and prices at the pump skyrocket.

For the wealthiest, most powerful nation in the world this is a ridiculous situation that will only get worse as our insatiable demand for gasoline keeps growing and refinery capacity falls further behind in the coming years.

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.

President Bush recently signed a new energy bill that tries to make it easier to build new oil refineries, especially in areas with high unemployment