08 Apr 2002 Gasoline Shortages Begin – Prices Approach 2001 Levels

Record high gasoline prices? Severe shortages? According to Tom Randall, director of The National Center for Public Policy Research’s John P. McGovern MD Center for Environmental and Regulatory Affairs, all the elements are in place for another energy crisis.

The U.S. petroleum industry is entering one of the most vulnerable periods in recent history,” Randall noted. “Shortages are already emerging. In the last two years, refinery fires and pipeline shutdowns contributed to the shortages and price spikes. We have yet to encounter these additional problems this year.”

According to the U.S. Energy Information Administration, the average retail price for regular gasoline had risen 25.5 cents over five weeks, reaching $1.371 by April 1. Current gas prices are rapidly closing in on 2001 levels.

In Phoenix, Arizona in early April, Phillips Petroleum Company ran out of both regular and premium unleaded gasoline for several days. Phillips also announced it would allocate supplies to its dealers in the St. Louis, Missouri area, cutting off shipments to independent retailers there altogether.

Randall notes that three factors make the oil industry and consumers uniquely vulnerable to rising prices and shortages:

• The Organization of Petroleum Exporting Countries (OPEC) cut production to raise world oil prices, which are now approaching $30 per barrel. This is nearly a 50 percent increase over the 2001 low.
• Refinery capacity in the U.S. is severely limited. The Environmental Protection Agency’s New Source Review standards are interpreted so inconsistently that no new refineries have been built in over 25 years although many existing refineries are obsolete and shut down. Remaining refineries are operating at near-full capacity, seriously increasing the likelihood and severity of fires and other types of breakdowns due to reduced maintenence periods.
• At this time of year, many refineries must temporarily shut down to convert to making a dozen different EPA-mandated summer-blend fuels. Summer-blend fuels, mandated to reduce air pollution, have produced mixed results in improving air quality.

Also, instability in the Persian Gulf stemming from the war on terrorism and increasing Israeli-Palestinian tensions could lead to future availablility of oil and gasoline. This ominous scenario will provide a backdrop for what promises to be a contentious debate in the U.S. Senate this month over energy, domestic oil exploration and related matters.

Information on domestic oil exploration from the John P. McGovern Center for Environmental and Regulatory Affairs includes: “Wishes Won’t Fuel Our Economy: We Need Oil Drilling” (https://nationalcenter.org/NPA375.html), “Senate Democrats Fight Energy Bill” (https://nationalcenter.org/TSR101801.html) and “Environmentalists Oppositionto Oil Exploration in ANWR is Unfounded” (https://nationalcenter.org/NPA324.html).

The John P. McGovern, MD Center for Environmental and Regulatory Affairs is a project of The National Center for Public Policy Research, a non-partisan, non-profit education foundation. For more information, contact Tom Randall at 773-857-5086 or [email protected].