Utah Sen. Orrin Hatch announced a plan May 5 to propose legislation that he says would reduce gasoline prices by increasing production at U.S. refineries.
The Gas Price Reduction Through Increased Refining Capacity Act of 2005 is part of a three-pronged approach Hatch says is a long-term solution to the country’s soaring gas prices.
At the end of April Hatch introduced legislation aimed at making alternative fuels and advanced technologies profitable. The third part of Hatch’s plan would increase efforts to develop oil shale and tar sand deposits in Utah, Colorado and Wyoming.
“I wish there were something we could do to bring prices down immediately, but I can’t promise that,” Hatch said, standing feet away from pumps at a Salt Lake City Sinclair gas station charging $2.25 for a gallon of unleaded gasoline.
“The legislation I’m proposing and policies that Congress is considering are long-term solutions,” he said.
No new refinery since 1970s
A new refinery has not been built in the United States since the 1970s, Hatch said. With the difficult economics of refining, nearly 200 refineries have been shut down since the last one was built leaving 149 overworked refineries, he said.
Refineries must invest in expensive new equipment to comply with regulations, which trump investments for equipment that would increase capacity. Rates of return in refining are lower than others in the petroleum industry, according to a National Petroleum Council report.
Hatch hopes that providing financial incentives to increase refinery capacity would decrease the amount of imported refined petroleum products the country must rely on.
“It’s extremely important that we do everything we can to increase domestic supply and we can do that by increasing refinery capacity,” said Bob Slaughter, president of the National Petrochemical and Refiners Association.
U.S. refinery production does not meet demand
American refineries are capable of producing about 17 million barrels a day, but demand is about 20 million barrels a day, Slaughter said. The value of petroleum and petrochemical products is increased during the refining process, and by decreasing the need to import refined gasoline, diesel and home heating oil prices would go down, he said.
Hatch’s plan would focus mostly on encouraging investment in increasing production at existing refineries, although it doesn’t exclude the building of new plants. Either way, it’s unlikely that the country could produce all of the petroleum products used on a daily basis, Slaughter said.
