As oil prices dip, industry faces questions about summer supplies
Oil prices dipped from a nearly nine-month high today, and everyone’s atwitter over what the summer will hold. The industry is beset by turmoil, with hostage-takings in Nigeria and turf battles in Gaza the latest contributors to price and supply instabilities. In addition, the U.S. biofuels push is leading Big Oil to cut back on refinery-expansion plans. U.S. motorists used 143 billion gallons of gasoline in 2006, and had been expected to demand 161 billion gallons by 2017 — a scenario that saw Big Oil planning a 10 percent boost in capacity. But with calls for both ethanol and efficiency growing, oil execs now say, “Eh, whatever.” As a result, simply put, supplies will stay low-ish and prices will stay high. Said Sen. Byron Dorgan (D-N.D.) about the increasingly consolidated industry: “It’s a perverted system that does not act as a free market system would act. If you narrow the neck of refining, you actually provide a greater boost to prices which is a greater boost to profitability.”
