Tahlequah Daily Press

February 21, 2014

Energy expert: Regulations often at the core of rising fuel prices

Staff Writer

TAHLEQUAH — With spring just three weeks away, fuel prices are again climbing, and officials in the energy industry are offering different reasons for the increase.

According to AAA, Oklahoma’s gasoline price average has risen more than 11 cents per gallon over the past two weeks.

“We’re in that tricky time of year when refinery anxiety is the rule of the day,” said Chuck Mai, spokesman for AAA Oklahoma. “Less gasoline is being produced as refineries gear down, clean out and ramp back up again to produce summertime fuel blends.”

Dr. Kirk Boatright’s view shares a common thread. Boatright, a Tahlequah resident who formerly worked for the Jersey Production Research Corp. of Exxon and the Pan American Petroleum Corp. of Amoco in Tulsa, is also a member of the Society of Petroleum Engineers.

He said federal regulation, not oil producers, is one of the main causes for the increase in prices at the pump.

“The primary factors affecting prices are government regulations, and particularly at this time, requirements,” said Boatright. “A major factor relative to those regulations is required changes of blends of gasoline – particularly for areas such as California, as well as some other regions. The blends are being changed from winter to summer driving requirements. This is costly, and in my opinion, to a great extent, unnecessary.”

Boatright said this is the time of year when refineries have scheduled shutdowns for required maintenance, and are selectively shuttered in a sequence, to at least meet adequate production to support the company.

The national average price at the pump is $3.37 per gallon, 6 cents more than it was a little over two weeks ago, but 36 cents below the price recorded one year ago.

AAA expects gas prices to drift higher over the next two months because of refining issues, topping out in Oklahoma between $32.5 and $3.35 before falling in May and June.

“Demand for gasoline is increasing, anticipating that the U.S. will survive economic events that currently are in progress,” said Boatright. “U.S. demand for gasoline was approaching 22 million barrels per day about eight years ago, when it was said the oil production could not keep up with the demand. However, as a result of the economic downturn, consumption approached a low of 16 million barrels per day. Demand is now increasing at a dramatic rate. Current demand is 19.5 million barrels per day and expected to keep rising.”

According to Boatright, no new refineries have been built in the U.S. since the 1970s, despite the growing demand for increased gasoline availability.

“Because of the extreme cost, companies are being forced to go outside the U.S. for construction of refineries, due to government regulations. They cannot economically justify construction of those refineries, due to regulations in the U.S.,” Boatright said. “Corporations have the highest tax rate in the world. Therefore, just based on good economics, refineries are being built in other countries.”

According to a report by Fred Brownbill, of the Save America Corp., several technical and economic factors determine why companies ship crude overseas for processing.

“The crude petroleum is sold to the highest bidder, not the nearest bidder,” wrote Brownbill. “There are different kinds of crude oil, such as sweet/light and dark/heavy. They have different applications and uses.”