President Obama continued his public relations roadshow this week to defend his energy agenda against a still-skeptical American public. The president wrongly took credit for increased energy production and new pipelines, yet he failed to even mention the great impact his new regulations are having on prices at the pump. An editorial in today’s Investor’s Business Daily highlights the important role EPA regulations are playing in today’s American energy challenges. Refineries in the Northeast have been forced to shut down due in part to costly new mandates and environmental standards. The Energy Department has warned that East Coast drivers are likely to see prices spike even higher this summer as a result of this reduced refining capacity. On Wednesday, March 28, the Energy and Commerce Committee’s Energy and Power Subcommittee will hold a hearing to examine legislative responses to rising gasoline prices, including a discussion draft of Subcommittee Chairman Ed Whitfield’s Gasoline Regulations Act of 2012. Visit the Energy and Commerce Committee website for more information.
Investor’s Business Daily
EPA’s Heavy Hand Seen In Gas Crisis
Regulation: Fearing gas price spikes on the East Coast this summer, Washington pols are trying to talk refiners out of closing unprofitable plants. It’s the EPA they ought to hector.
The untold story behind soaring pump prices is that major U.S. refineries are going out of business and creating at least regional shortages thanks in no small part to costly EPA rules.
Over just the past six months, three refineries supplying about half the gasoline, diesel and jet fuel to the East Coast have closed, including two owned by Sunoco Inc. They say they simply cannot make money anymore.
Philadelphia-based Sunoco’s refinery business in the Northeast has lost almost $1 billion over the past three years as U.S. demand for gas fell and the cost of foreign crude soared.
But over the same period, it had to shell out “significant expenditures for environmental projects and compliance activities” to satisfy onerous EPA mandates, according to the company’s latest 10-K report.
In fact, it’s spent more than $1.3 billion just to comply with stricter EPA rules, which carry stiff fines or penalties for violations. Sunoco fretted that these regulatory costs would grow exponentially under the Obama administration, which has hit some of its refineries with finesâ€¦
In the end, the company could not weather market crosscurrents long enough to recover the government-induced costs. It bled so much money that it decided to exit the refining business entirely.
A Sunoco spokesman confirmed in an interview with IBD that “the cost of complying with environmental requirements” was one of the factors that led it to decide to exit refining.
Drivers in the Northeast will be hit hardest by the shuttering of its large plants in Philadelphia. This has spurred the Energy Department to warn of capacity shortages along the East Coast and a “spike” in gas prices this summer.
“If areas cannot be adequately supplied in the short term, prices can spike,” Energy said in a report issued last month.
Of course, this comes on top of already soaring pump pricesâ€¦
President Obama, for his part, says he’s “doing everything I can to help you save money on gas.” But if he really wanted to make gas affordable for consumers, he wouldn’t make it so costly for companies to refine it.
Right now, capacity is not a problem, at least not nationally. But if EPA regulations are not eased, more refiners could throw in the towel and remove the excess capacity on the market that has helped to absorb some of the shock from crude prices.
Read the full article online here.