America’s petroleum refiners manufacture safe, proven and reliable high-quality fuels and other products in an environmentally responsible manner to keep America moving, our economy growing, our citizens employed and our nation secure.
But refiners are being squeezed by costly government overregulation, foreign competition, high oil prices and reduced fuel demand.
A recent report by the Department of Energy found the compounded burden of federal regulations was a significant factor in the closing of 66 oil refineries in the United States in the past 20 years, wiping out thousands of jobs. Two money-losing refineries in the Philadelphia area are threatened with permanent closure, while a third that shut down last year will be reopened after it was recently purchased by Delta Airlines.
This “perfect storm” isn’t just hurting our nation’s refiners and their workers. It’s hurting every American by putting upward pressure on the price of gasoline, diesel fuel, jet fuel, home heating oil and other refined petroleum products. It’s weakening America’s economic and national security by endangering American jobs and threatening to make our nation more reliant on oil and fuel from unstable regions of the world.
American refiners spent $112 billion on environmental improvements just from 1990 to 2008 and continue to invest in high-tech emissions control systems to reduce impacts on the environment. While many of these changes have achieved big reductions in emissions, they have raised energy costs and have put American refineries at a competitive disadvantage against foreign counterparts not faced with such costly regulations.
Further extreme environmental regulations are being demanded by those who want to wage war on fossil fuels. This overregulation will have little or no environmental benefit, but will make it harder for refineries to continue to serve consumers and hold down fuel costs.
In addition, high oil prices are hurting refiners who must buy oil to manufacture fuels. According to the latest U.S. Energy Information Administration report, crude oil costs account for 67 cents of every dollar in the cost of a gallon of gasoline, followed by 11 cents for taxes and 6 cents for distribution and marketing, leaving just 16 cents to cover all fuel manufacturing costs.
As if these challenges weren’t enough, President Barack Obama never misses a chance to denounce the companies that produce oil and use oil to manufacture fuels and other refined products.
President Obama incorrectly claims that American companies in the oil and natural gas sector receive billions of dollars in taxpayer “subsidies.” In fact, these companies pay more than $31 billion a year in federal taxes and simply get the same type of tax deductions as other American manufacturers.
President Obama severely restricts where American companies can extract oil that U.S. fuel manufacturers need, in effect placing a giant “Do Not Disturb” sign on more than 90 percent of federal lands and federal waters, including many areas believed to hold vast quantities of oil and natural gas.
And President Obama is blocking construction of the Keystone XL pipeline that would bring more than 800,000 barrels a day of oil from Canada and from North Dakota and Montana to Gulf Coast refineries. This amounts to imposing economic sanctions not just on the good people of Canada but on the American people as well.
In addition, the federal Renewable Fuel Standard requires an increasing amount of ethanol to be mixed with gasoline. Already, most gasoline sold in the United States contains 10 percent ethanol, resulting in a 10 percent drop in the demand for the gasoline refineries manufacture.
The Environmental Protection Agency wants to push the amount of ethanol up to 15 percent for cars and light trucks manufactured since 2001, despite concerns by many that inadequate testing of the higher ethanol blend will cause serious and costly damage to engines that power cars, other vehicles and outdoor power equipment.
And finally, increasing federal fuel efficiency standards for vehicles are further reducing demand for refined products. Refineries have responded by increasing exports of surplus fuel (primarily diesel, which is used more widely abroad) to keep refineries open, preserve American jobs, reduce America’s trade deficit and benefit our economy. More exports are good news for our economy.
The 145 petroleum refineries in the United States are a vital national asset. It would not be in America’s national interest to see fuel manufacturers shut their doors, lay off their workers and be replaced by foreign companies and foreign workers – suffering the same fate as many American steel, textile, appliance, electronics and other manufacturers.
Instead of demonizing and denouncing American refiners, our leaders and our people should work with refiners to meet our nation’s energy needs.
Charles T. Drevna is president of the American Fuel & Petrochemical Manufacturers.
About the Author
