Most of the focus on the damage coming from cap-and-trade has focused on electrical prices and their multiplier effect throughout the economy, but that won’t be the only place consumers feel the pinch. The Wall Street Journal reports on a study which shows that gasoline refining in the US — already unable to meet demand — will get further damaged by Waxman-Markey. Production will drop by 17% after it goes into law, and the US will have to import even more of its gasoline, leading to higher prices and more reliance on foreign producers:
Proposed federal legislation aimed at curbing global warming would drastically reduce domestic fuel production, according to a new study commissioned by the oil industry as part of its campaign to oppose new restrictions.
The report’s findings, which are expected to be released Monday, project that by 2030, U.S. refining production could drop 17% from today’s levels if the climate bill is passed as currently proposed. The drop would have to be made up by foreign imports, the study says, meaning the U.S. could end up relying on other countries for 19.4% of its refined fuel — nearly twice the amount it imports today.
The American Petroleum Institute, the U.S. oil industry’s main trade group, commissioned the study in an effort to hammer home its argument that restrictions on emissions will be a burden on U.S. refiners. Although part of an attempt to derail the bill, the report gives the first detailed prediction of the legislation’s impact on refining operations. The report was done by EnSys Energy, a consultancy that specializes in the refining sector.
The report also underscores the bleak prospects for refiners, who have had profits wiped out by slumping demand during the recession.
During the 2008 price escalation, most Americans realized that our dependence on foreign producers left us vulnerable to supply shocks and whims of hostile regimes overseas. Even though we buy most of our oil from the Western Hemisphere, with Canada and Mexico our primary partners, oil prices reflect a worldwide market. Embargoes and production reductions by other producers raise prices of crude oil around the world. The same is even more true of refining exporters, a narrower category where individual producers can have a bigger impact.
In 2008, both John McCain and Barack Obama proposed solving the problem with an explosion of renewable-energy resources, but McCain understood that it would take decades to bring that to fruition and proposed an aggressive use of American oil, coal, and natural-gas resources in the next 15 years as a transition. Obama paid lip service to this idea but in practice has opposed it. Waxman-Markey’s allowances tilt heavily towards electricity production and almost ignore refiners. While the growth of demand for gasoline will decline as cars get more efficient, the demand itself will not drop nearly enough to compensate for the lack of domestic production.
The result? We will either make ourselves even more reliant on more expensive imports, or we will run out of gasoline during peak demand periods. The latter will lead to rationing such as that seen during the 1973-4 and 1979 energy crises, where people waited for hours in long lines to get limited supplies of gasoline for their primary transportation. Waxman-Markey leads directly to that result, and not in 20 years but in just a few years after implementation.
Instead of making ourselves more self-reliant, the Obama administration will put us even more at the mercy of foreign suppliers of energy. Will we wait until we get stuck in those rationing lines to realize it?