Gas Lines Return to U.S.: Let's Party Like it's 1973!

Posted by Joshua Holland, AlterNet at 12:55 PM on October 1, 2008.

Reuters ...

A severe fuel shortage has gripped parts of the southeastern United States, causing long lines at filling stations and symbolizing for some people their fears about the wider economy.

The shortage began two weeks ago in Atlanta, the region's largest city, when oil refineries on the Gulf Coast were shut down by hurricanes Gustav and Ike earlier this month. Parts of north Georgia, western North Carolina and parts of Tennessee were also affected.

The effects on motorists have been dramatic. Most service stations in Atlanta are out of gas, with plastic bags placed over the pumps or signs saying "out".

As a result, drivers are cruising the city hunting for gas -- often with a fuel meter needle hovering close to empty. When they find gas, it's often above $4 a gallon.

Traffic is lighter on the city's streets and highways as some residents share rides and limit their journeys.

Lines and elaborate queuing systems have developed at gas stations on days when oil companies deliver fuel. Motorists report showing up at gas stations before dawn to beat the line only to find dozens of cars ahead of them.

[...]

The shortage has also had a psychological impact. Like many U.S. cities, Atlanta is car dependent and residents say they had until now taken refueling for granted.

It's good to see people driving less, but this isn't the way to achieve it. Like many American cities, Atlanta doesn't offer much of an alternative to firing up the ole' clunker -- one's public transit options in Atlanta are limited, to say the least.

Why are there gas lines popping up in the Southeast? Well, there's an immediate cause, and then there's a longer-term trend to blame.

The proximate cause is simple enough. Hurricane Gustav shut down 15 percent of U.S. refining capacity, and then, two weeks later, hurricane Ike shut down 21 percent of the country's refining capacity, along with "most crude oil, product, and natural gas pipelines originating in the Gulf of Mexico and on the Gulf Coast."

It's a creaky system. No new refineries have been built in the U.S. since the 1970s. Conservatives often argue that the lack of new refineries is all a result of those mean enviro-fascists with their crazy ideas about limiting sulfur emissions and protecting our air quality.

Silly liberals.

Which makes it an excellent time to revisit Senator Ron Wyden's report (PDF) on how Big Oil itself is primarily responsible for tightening capacity in order to keep gas prices high. Here's Wyden:

The oil industry and its allies would have the public believe that insufficient refining capacity, restrictive environmental standards, growing gasoline demand and OPEC production cutbacks are the primary reasons for the current oil and gas supply problem.

However, the record shows - supported by documents I have obtained - that there is more to the story. Specifically, the documents suggest that major oil companies pursued efforts to curtail refinery capacity as a strategy for improving profit margins; that competing oil companies worked together to subvert supply; that refinery closures inhibited supply; and that oil companies are reaping record profits, yet may benefit from a proposed national energy policy that would offer financial incentives to expand refinery capacity.

The 2005 energy bill included $2.8 billion in subsidies and tax breaks for fossil fuel producers (although little of it was specifically targeted at refining).

For the last several months limited domestic refinery capacity has taken center stage as the purported reason for insufficient domestic gasoline supply and higher prices.

In the mid-1990s too much refining capacity, not too little, concerned the nation's major oil companies. At that time, the oil and gas industry faced what they termed "excess refining capacity," a circumstance they viewed as a financial liability that drove down overall profit margins. The industry reduced the total amount of potential supply by closing down more than 50 refineries in the past decade. Since 1995 alone, 24 refinery closings have taken nearly 830,000 barrels of oil per day.

Information I have received during my ongoing investigation raises serious concerns that the nation's major oil suppliers have set out in a strategic effort to orchestrate a financial triple play, a coordinated effort that would reduce supply, raise prices at the pump and relax environmental regulations. Unfortunately, in each case, it is the consumer who takes the hit.

While the documents target activity on the West Coast and refinery closings in 11 states, they point to practices with significant national ramifications. The companies involved are national companies that operate in multiple states. In addition, gas and oil is a fungible commodity and the amount of capacity that has been taken offline is significant enough to affect national markets.

Tagged as: oil, gas, refining, wyden report, gas lines

Joshua Holland is an editor and senior writer at AlterNet.