New laws leave oil refiners uncertain

Some rethink expansions as legislation aims to reduce gas use

Oil refiners may reconsider plans for some refinery expansion projects in 2008 in response to new energy legislation that could reduce gasoline use in coming years, industry groups and refiners say.

While expansion projects already under way won’t be affected, those in the early planning stages could be delayed or canceled, they said


Within 10 years, U.S. refiners could be producing less gasoline than they are today as a result of the new energy legislation, which calls for stricter auto gas mileage standards and more ethanol output, said the National Petrochemical and Refiners Association, a trade group in Washington.

If that’s the case, “it doesn’t really make sense for refiners to spend billions of dollars expanding to meet a demand that’s not going to be there,” said Bill Day, spokesman for San Antonio-based Valero Energy Corp., the nation’s largest refiner.

But industry critics say refiners are using new energy policies as an excuse to keep refining capacity tight and their profits high. They claim refinery additions will still be needed to feed growth in gasoline and demand, as well as bridge a shortage in refining capacity today that is being filled by gasoline imports.

Houston Chronicle