THERE’S A GOOD ARTICLE in the Wall Street Journal (subscription, alas, required) on how refinery problems are contributing to the recent spike in oil prices. People in America don’t like having refineries near them, or indeed, anyone else; the last time America built a new refinery was in 1976. Refiners have done amazing work increasing throughput with technology, but there are limits. Especially because they are hamstrung by the patchwork of local regulations, which mean that gasoline destined for Dubuque can’t be sold in Chicago. Oil must be processed in smaller batches, limiting efficiency, and worse, making the system vulnerable to bottlenecks: if something happens to a Chicago refiner, gas stations can’t buy “foriegn” gas to fill the gap, so consumers get sudden price spikes at the pump. Next time you wince at the cost of a gallon of regular unleaded, don’t just curse OPEC; curse the environmental regulators (and special-interests lobbying local officials for their particular brand of fuel additives) for making the market less efficient.
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