The Truth About Gas Prices

RUSH: All right, the gasoline price. Today on CNN’s American Morning, the cohost John Roberts was interviewing Lynn Westfall, who is the chief economist at the Tesoro Corporation. Roberts says, ‘As we try to get to the bottom of why gasoline prices are so high in this country, critics are pointing fingers at the refining industry,’ which is this guy’s industry, ‘saying that you people are the ones responsible because the price of a barrel of oil isn’t as high as it was a couple years ago when gasoline prices were lower. Are you refinery people responsible?’

WESTFALL: In a way we’re responsible, in the way that it’s a global market for gasoline. We’re now importing about 13% of our gasoline needs in the United States, and those imports have to be supplied by foreign refineries who are very inefficient at making US spec gasoline. So we have to bid up the price of gasoline on the world scale to give the incentive to these very inefficient refineries to make something that they weren’t built to make. We also have to pay the price to ship the product over here. So, yes, when US refineries are running at absolutely a hundred percent capacity, and demand keeps growing, we do have to go overseas to very inefficient refineries to fill our supply-demand gap.

RUSH: Did you hear that, ladies and gentlemen? I’m bouncing off the call we had yesterday from the guy who said the oil companies own the product from the time it leaves the ground ’til the time it goes into your gas tank. How many of you knew that we had to import gasoline, not oil — everybody knows that — how many of you knew we had to import gasoline? We have to import 13% of our gasoline. And guess what? The places we’re importing it, from these refineries aren’t tooled to make all these different specs or these different grades of gasoline. Chicago needs it’s own, LA, California needs their own, all because of the environmentalist wackos. So it’s going to cost more to get what we need, then we gotta pay to get it shipped over here, and this guy from the refining industry, ‘Yeah, it’s our fault if you want to say so. We’re not allowed to build any more refineries. We gotta buy gasoline from outside the country.’ Next question from John Roberts was, ‘Well, we keep hearing from analysts that refineries in the US are not able to keep up with demand. Has your industry got a problem here domestically?’

WESTFALL: No, that’s very correct. Over the last nine months gasoline demand has gone up at the rate of two and a half new refineries a year, and we can’t build that kind of capacity. The industry has never been able to build that kind of capacity. So every year, if demand goes up that much — certainly we can do some things at existing refineries, and I think every refinery company is doing something at existing refineries to increase their capacity. But it’s being far outpaced by demand growth. So in fact we’re getting more and more dependent on imports.

RUSH: Of gasoline, not oil. That’s already established. Imports of gasoline. Now, why can’t we build any more refineries? Well, go ask the left. Go ask the environmentalist wackos. Do you realize what the permit process would be if you started a day trying to get permission? Do you realize the groups that would stop you and oppose you and demand this? You couldn’t harm one sand flea in the construction process. You couldn’t displace a white tail rat. You couldn’t do anything building the refinery. From the time you start planning it, you go through the permit process, you pay the grease that you gotta go through to get through all this. Ten years, to build a refinery. One more sound bite from Mr. Lynn Westfall here from the Tesoro Corporation. John Roberts says, ‘So what’s the problem with expanding refinery capacity? We keep hearing that there hasn’t been a new refinery built in this country since the seventies. We do hear about some expansion. What are the disincentives to doing it?’

WESTFALL: Well, when you’re looking at building a new refinery, it’s a six- to seven-year proposition before you can get it built. So for six to seven years you’re spending billions of dollars and getting no income. After that, it would take even today’s margins for ten to 15 years to pay out that kind of a massive expenditure. So to build a new refinery you’re basically asking someone to take a 20-year risk.

RUSH: You’re asking them to take a 20-year risk. He’s not going to talk about the hassles he’s going to run into with the environmentalists. He’s not going to give himself any problems doing that. He left that out. But that’s part of this. It’s going to be ten years, time you start winding — and plus, wherever you build it, you gotta deal with the local government there. You gotta go to that town council or whatever they are, the city counsel men, you gotta deal with those people the way you deal with the waste management people. We’re behind the eight ball here. We haven’t done it. And who’s standing in the way of this, folks? We’re a growing economy, progress. Who’s standing in the way of this? Same people standing in the way of drilling for more oil. Democrats and the American left. So a 20-year investment to make any money if we start today building a new refinery? Looks and sounds like we’re going to be buying more gasoline from overseas. We’re going to be buying gasoline refined by others. That’s going to continue to put pressure on the price. I found it interesting. The refinery guys taking all the heat here. He works for the trade group that represents refineries, and he’s taking all the heat, he’s taking all the heat off of Big Oil and all the oil companies combined, which is interesting. Will the American people figure this out? Hear it, learn it, or will they rely on the old taboo and the old clichés?