All NEW Investors: Your gift matched $ for $ this week! GIVE NOW

Petroleum 101

Scott Tong Apr 25, 2006


KAI RYSSDAL:George Bush used to be an oil man. He’s got an MBA from Harvard. And today the president tried to give us a lesson in Petroleum 101. It was part of his plan to push prices down. We don’t have enough crude oil, he said. The raw stuff. Also not enough processed crude: gas. Part of the president’s solution? More refineries.

But Marketplace’s Scott Tong reports from Washington the industry thinks the idea needs some refining itself.

SCOTT TONG: Energy Policy Groundhog Day — that’s how one lobbyist put it. Gas creeps to three bucks and the President scrambles for answers.

Here he is October 4th, one month after Katrina.

PRESIDENT BUSH: This country needs to build more refining capacity. We haven’t built a new refinery since the 1970s.

And here he is today.

PRESIDENT BUSH: We’ve got tight supplies because we haven’t expanded refining capacity. There hasn’t been a new refinery built in 30 years.

He blasted red tape that refiners face when building new facilities.

But here’s the rub: They don’t want new facilities.

Industry analyst Fadel Gheit of Oppenheimer and Co. says a new refinery’s a long-term, $5 billion gamble. There are just too many questions: Where will oil prices go in 30 years? Who’s gonna want a refinery in their town?

FADEL GHEIT: They are eyesores. They bring down real estate prices.

Plus, what if policymakers push for petroleum alternatives and shrink the gas market?

GHEIT: You never know, you get a new congress or a new president, all of a sudden they change the rules. Because when the political winds shift the oil industry ends up holding the bag.

Gheit says the president’s list of fixes today would do little.

But energy economist Phil Verleger isn’t so sure. He noticed one item — to let suppliers sell dirtier gasoline temporarily.

PHIL VERLEGER: We did that right after Katrina, and the people in St. Louis noticed brown skies and more pollution. So the tradeoff you’d make is 50 cents at retail, and putting up with some brown skies.

It’s a tradeoff the EPA may fight.

In Washington, I’m Scott Tong for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.