Why are gasoline prices high?
There’s plenty of crude oil. The essential problem is that the world, and the United States in particular, lacks refining capacity for gasoline. There has not been a major refinery built in the United States since 1977, and there are no plans to build new ones.
During the pandemic, gasoline demand fell sharply, and refineries closed around the world. In the U.S., some old refineries suffered irreparable damage due to hurricanes, while others were converted to produce renewable diesel. Altogether, we lost about 2 billion barrels of capacity per day, or enough to power 30 million cars. In May and June, as the summer driving season started, demand soared and prices shot up temporarily to $5 per gallon or more.
Today, no major automobile manufacturer is investing in the development of internal combustion engines. All current development is devoted to electric and hydrogen-powered vehicles. GM alone is investing $7 billion in four Michigan battery and electric vehicle plants aiming at an all-electric future.
A new refinery takes 10 years to plan and build and costs as much as $10 billion. Even energy firms like giant Exxon do not undertake such expenditures without reasonable assurance that the investment will produce profits for many years to come. In the face of an auto and truck industry that is rapidly changing to non-internal combustion technology, investment of that magnitude would be contrary to their own best interest.
Charles Henry
Greensburg