Why Aren't More Oil Refineries Being Built in the United States?

The debate over the future of oil refineries has heated up in recent years, especially in the context of declining demand for gasoline and diesel, shifts towards electric vehicles (EVs), and the broader energy landscape in the United States. This article will explore why new oil refineries are not being built in the U.S., discussing the factors that have led to this situation and potential future implications.

The Changing Demand for Gasoline and Diesel

The demand for gasoline and diesel in the United States is poised to change forever. Several key trends are driving this transformation:

Middle Class Extinction: The American middle class is likely to decline or become less influential, reducing the number of car owners. This demographic shift will translate to a decrease in overall demand for fossil fuels. No More Car-Owner-Centric Civilization: The United States is moving away from a model where the majority of citizens own cars. This shift is being accelerated by the rise of electric vehicles and public transportation. Degraded Fuel Quality: Traditional oil reservoirs are producing lower quality fuel, such as diesel, making it less economically viable to refine these products. Declining Demand for Traditional Vehicles: The global trend towards EVs is replacing traditional internal combustion engine vehicles, which drastically reduces the demand for petroleum-based fuels.

Reasons for Limited New Refinery Construction

Despite the changing landscape, the construction of new oil refineries in the U.S. remains limited due to several practical and political factors:

Permitting Process: The lengthy and complex permitting process can take more than 20 years to complete. This extended timeline makes it unattractive for companies to invest in new facilities. Economic Constraints: Building a refinery costs billions of dollars. The uncertainty of future demand and the long-term commitment required makes these investments riskier. Global Economy and Choice: The global economy and the choices made by other countries can dictate the future of the U.S. oil industry. For instance, international policies and market forces often play a significant role in determining demand patterns.

Furthermore, the lack of enthusiasm for new refinery construction can be seen in the words of Bernie Sanders:

"Since it takes as much as a half decade to site, permit, construct and staff one, companies can cost the equivalent of three fabs. Real men have fabs. There is not much enthusiasm for idle conjecture."

Companies are wary of the sunk costs involved in building new facilities that may not see immediate returns, especially given the existing capacity and the certainty that demand for certain fuels is declining.

ADDITIONAL FACTORS AND POLITICAL INFRASTRUCTURE

Recent political events and statements from key figures have further complicated the situation:

Biden’s Energy Policy: President Joe Biden has vowed to significantly reduce the U.S. oil industry and coal mining. His Democratic policies are aimed at combating climate change and promoting renewable energy sources.

Biden’s 2020 Campaign Promises: On record, Biden stated his intention to dismantle the oil industry and coal mining in the U.S. However, his policy faced a significant obstacle when Democrats won the election, despite efforts from some to steal it.

Environmental Activism and Regulators: Strong environmental movements and regulatory bodies have made it difficult for companies to expand or build new oil refineries. These groups are often opposed to increased fossil fuel production, focusing instead on cleaner alternatives.

Global Economic Interactions: The global economy is interconnected, and trends in other countries can affect U.S. energy markets. For example, the global shift towards EVs and renewable energy sources can impact U.S. demand for oil and gasoline.

Despite these challenges, some commentators and politicians argue that changes to the regulatory environment could hasten construction:

Permitting Process: 'The permitting process for a new refinery could take decades. New capacity in the US is generally achieved by upgrading existing facilities.'

While upgrades to existing facilities can help meet new demands, this solution is not as comprehensive as building new refineries. Additionally, efforts to streamline the permitting process and reduce regulatory barriers will be crucial in addressing the current challenges.

CONCLUSION

The declining demand for gasoline and diesel, evolving energy policies, and the complexities of the permitting process have collectively contributed to the limited construction of new oil refineries in the United States. As the country moves towards a greener future, it will be interesting to observe how these factors will shape the energy landscape in the coming years.