Gas prices seem to be the subject of many a newscast as of late. Or as of always. Lots of people are outraged at fuel prices, especially as the summer boating season begins full swing, which could affect whether someone buys a boat or not. So here goes nothing.
A primary reason for the price spikes, in this country at least, is refinery capacity. It’s crucial because refineries provide the fuel supply to the regions surrounding them. When something happens to the gasoline supply in a given area, it’s not simply a matter of shipping fuel from the next county or the next state. It often has to be brought in from great distances, and just as often it’s either in short supply or not available.
The capacity to refine crude oil into gasoline is a key factor. The United States hasn’t built an oil refinery with a capacity greater than 100,000 barrels per day since 1977. The newest refinery in the country began operating in 2008 in Douglas, Wyo., but many of the smaller refineries have closed, down from 300 in the early 1980s to around 150 at present. The capacity of those roughly 150 refineries has grown, but they just haven’t been able to keep pace with demand. Consider that there are 317 million people in the U.S. now compared with 1977 when there were 220 million, and you can see how it’s hard for the refineries to keep up.
Another reason for higher prices in summer is demand. People go on vacations in the summer, so gasoline sales increase, which puts upward pressure on prices. Another reason prices go up in summer is due to differences in gasoline formulas. There is a winter blend, which is formulated to evaporate at lower temperatures, and a summer blend, which has a higher evaporative temperature. Guess which one is more expensive to make? Bingo. Summer blend.
Demand definitely has grown in the U.S., but also in developing countries, such as China and India. The growth in world demand coupled with the depreciation of the dollar also serves to make crude oil more expensive to U.S. producers. According to the U.S. Energy Information Administration, a barrel of crude was selling for about $99.60 a barrel at press time.
American’s biggest problem with high prices is that they come at a time when oil companies—with public financial statements—are posting record profits.
The instability of the Middle East and the Crimean peninsula contributes to the price hikes, as do refining requirements for oxygenates such as methyl tertiary butyl ether and ethanol. There are now 18 different blends of fuel, depending on which area of the country they are destined for.
Obviously, demand is expected to rise, so even with the domestic reserves new technology has allowed us to access, we could never produce all the oil we use. Even with high gas prices, Americans aren’t driving—or boating—any less. Their appetites for big SUVs has only just slowed, and the boat business is back on the uptick. My guess is prices will drop again right about the time we’re putting our boats away for the winter. That seems about right.