Angry About High Gas Prices? Blame Shuttered Oil Refineries
The U.S. has lost nearly 5 percent of its refining capacity in the past three months, as a handful of old refineries have shut down
The average price of gas is up more than 10 percent since the start of the year, a point repeatedly made during Wednesday's Republican Presidential debate. Predictably, the four GOP candidates blamed President Barack Obama for the steep increase.
Actually, the President doesn't have that kind of pricing power. The more likely reason behind the price increase, though certainly less compelling as a political argument, is the recent spate of refinery closures in the U.S. Over the past year, refineries have faced a classic margin squeeze. Prices for Brent crude have gone up, but demand for gasoline in the U.S. is at a 15-year low. That means refineries haven't been able to pass on the higher prices to their customers.
As a result, companies have chosen to shut down a handful of large refineries rather than continue to lose money on them. Since December, the U.S. has lost about 4 percent of its refining capacity, says Fadel Gheit, a senior oil and gas analyst for Oppenheimer. That month, two large refineries outside Philadelphia shut down: Sunoco's plant in Marcus Hook, Pa., and a ConocoPhillips plant in nearby Trainer, Pa. Together they accounted for about 20 percent of all gasoline produced in the Northeast.