Tuesday, June 3, 2008

Heavy Sour is cheaper than Light Sweet

The outrageous crude oil prices quoted on the TV news are not the whole story. The TV price is the price for the best grades of crude oil, thin (light) and low sulphur (sweet). The lower grade thick and sticky (heavy) and high sulphur (sour) sells for a third less than the premium grade. Heavy and sour crude can be refined to gasoline and diesel, but only state of the art modern refineries can do it. Plenty of older off shore refineries cannot handle heavy sour crude at all. Difficult as heavy sour crude is to refine, it's still enormously easier than refining oil shale or tar sands. Or making liquid fuels from coal.
If we had two or three more big refineries turning cheap plentiful low grade crude into gasoline and heating oil it would actually bring the outrageous prices down.
The US hasn't built a new refinery in decades 'cause of the NIMBY problem. NIMBY's buy gasoline and heating oil just like ordinary people. They just want the refinery located in some one else's back yard. Public spirited they are. Needless to say, the US no longer has enough refinery capacity to make all the gasoline and heating oil we need and is relying on off shore refineries to make up the short fall.
The US ought to build enough domestic refineries to satisfy domestic needs, and even do some export business. While we are at it, make the new refineries capable of handling the lowest grade crude on the planet. Refinery construction money spent in the US does more for the US economy than the same money spent in Aruba.
The Supreme Court recently ruled taking property by eminent domain for mere economic development purposes IS constitutional (the Kelo decision) . Take advantage of that. Pass a law declaring refineries to be a national security matter, and grant a major oil company eminent domain powers to take land for a new refinery. Declare that the small amount of land needed for a few refineries won't endanger any species. Stop the talking and the hand wringing and get on with it. Refineries take years to build, we need to start now.
Or do you like the idea of $5 a gallon?

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