Anthony Andrews
Specialist in Energy and Defense Policy
Robert Pirog
Specialist in Energy Economics
Molly F. Sherlock
Analyst in Economics
A decade ago, 158 refineries operated in the United States and its territories and sporadic refinery outages led many policy makers to advocate new refinery construction. Fears that crude oil production was in decline also led to policies promoting alternative fuels and increased vehicle fuel efficiency. Since the summer 2008 peak in crude oil prices, however, the U.S. demand for refined petroleum products has declined, and the outlook for the petroleum refining industry in the United States has changed.
In response to weak demand for gasoline and other refined products, refinery operators have begun cutting back capacity, idling, and, in a few cases, permanently closing their refineries. By current count, 124 refineries now produce fuel in addition to 13 refineries that produce lubricating oils and asphalt. Even as the number of refineries has decreased, operable refining capacity has actually increased over the past decade, from 16.5 million barrels/day to over 18 million barrels/day. Cyclical economic factors aside, U.S. refiners now face the potential of long-term decreased demand for their products. This is the result of legislative and regulatory efforts that were originally intended, in part, to accommodate the growing demand for petroleum products, but which may now displace some of that demand. These efforts include such policies as increasing the volume of ethanol in the gasoline supply, improving vehicle fuel efficiency, and encouraging the purchase of vehicles powered by natural gas or electricity.
Since the Clean Air Act Amendments, 15 distinctly formulated boutique fuels are required in portions of 12 states. H.R. 392, the Boutique Fuel Reduction Act of 2009, would further amend` the Clean Air Act to add temporary waivers for boutique fuels due to unexpected problems with distribution and give EPA authority to reduce the number of boutique fuels. The 2005 Energy Policy Act created the Renewable Fuel Program to substitute increasing volumes of renewable fuel for gasoline. The 2007 Energy Independence and Security Act expanded the program to cover transportation fuels in general, extended the program to calendar year 2022, and increased the target volume to 36 billion gallons renewable fuel annually. The 2008 Food, Conservation and Energy Act of 2008 reduced some of the federal subsidies and tax breaks favoring ethanol production. A 2007U.S. Supreme Court ruling found that EPA has the authority under the Clean Air Act to regulate carbon dioxide (CO2) emissions from automobiles. Though the ruling applied to automobiles, it had wider implications. In response to the FY2008 Consolidated Appropriations Act (H.R. 2764; P.L. 110-161), EPA issued the Mandatory Reporting of Greenhouse Gases Rule that requires suppliers of fossil fuels or industrial greenhouse gases (GHG), manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHG emissions to submit annual reports to EPA. H.R. 2454, The American Clean Energy and Security Act of 2009 (passed in the House June 26, 2009) would amend the Clean Air Act by establishing a “cap-and-trade” system designed to reduce greenhouse gas emissions (GHG) and would cap emissions from refineries and allow trading of emissions permits (“allowances”). As proposed, H.R. 2454 would require U.S. refiners to purchase emission credits for both their stationary emissions and the subsequent combustion of their fuels (predominantly consumed in the transportation sector). S. 3663, introduced in August 2010, would establish a Natural Gas Vehicle and Infrastructure Development Program to promote natural gas as an alternative transportation fuel in order to reduce domestic oil use.
The prospect of declining motor-fuel demand may persuade operators to idle, consolidate, or permanently close refineries.
Date of Report: November 22, 2010
Number of Pages: 43
Order Number: R41478
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Specialist in Energy and Defense Policy
Robert Pirog
Specialist in Energy Economics
Molly F. Sherlock
Analyst in Economics
A decade ago, 158 refineries operated in the United States and its territories and sporadic refinery outages led many policy makers to advocate new refinery construction. Fears that crude oil production was in decline also led to policies promoting alternative fuels and increased vehicle fuel efficiency. Since the summer 2008 peak in crude oil prices, however, the U.S. demand for refined petroleum products has declined, and the outlook for the petroleum refining industry in the United States has changed.
In response to weak demand for gasoline and other refined products, refinery operators have begun cutting back capacity, idling, and, in a few cases, permanently closing their refineries. By current count, 124 refineries now produce fuel in addition to 13 refineries that produce lubricating oils and asphalt. Even as the number of refineries has decreased, operable refining capacity has actually increased over the past decade, from 16.5 million barrels/day to over 18 million barrels/day. Cyclical economic factors aside, U.S. refiners now face the potential of long-term decreased demand for their products. This is the result of legislative and regulatory efforts that were originally intended, in part, to accommodate the growing demand for petroleum products, but which may now displace some of that demand. These efforts include such policies as increasing the volume of ethanol in the gasoline supply, improving vehicle fuel efficiency, and encouraging the purchase of vehicles powered by natural gas or electricity.
Since the Clean Air Act Amendments, 15 distinctly formulated boutique fuels are required in portions of 12 states. H.R. 392, the Boutique Fuel Reduction Act of 2009, would further amend` the Clean Air Act to add temporary waivers for boutique fuels due to unexpected problems with distribution and give EPA authority to reduce the number of boutique fuels. The 2005 Energy Policy Act created the Renewable Fuel Program to substitute increasing volumes of renewable fuel for gasoline. The 2007 Energy Independence and Security Act expanded the program to cover transportation fuels in general, extended the program to calendar year 2022, and increased the target volume to 36 billion gallons renewable fuel annually. The 2008 Food, Conservation and Energy Act of 2008 reduced some of the federal subsidies and tax breaks favoring ethanol production. A 2007U.S. Supreme Court ruling found that EPA has the authority under the Clean Air Act to regulate carbon dioxide (CO2) emissions from automobiles. Though the ruling applied to automobiles, it had wider implications. In response to the FY2008 Consolidated Appropriations Act (H.R. 2764; P.L. 110-161), EPA issued the Mandatory Reporting of Greenhouse Gases Rule that requires suppliers of fossil fuels or industrial greenhouse gases (GHG), manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHG emissions to submit annual reports to EPA. H.R. 2454, The American Clean Energy and Security Act of 2009 (passed in the House June 26, 2009) would amend the Clean Air Act by establishing a “cap-and-trade” system designed to reduce greenhouse gas emissions (GHG) and would cap emissions from refineries and allow trading of emissions permits (“allowances”). As proposed, H.R. 2454 would require U.S. refiners to purchase emission credits for both their stationary emissions and the subsequent combustion of their fuels (predominantly consumed in the transportation sector). S. 3663, introduced in August 2010, would establish a Natural Gas Vehicle and Infrastructure Development Program to promote natural gas as an alternative transportation fuel in order to reduce domestic oil use.
The prospect of declining motor-fuel demand may persuade operators to idle, consolidate, or permanently close refineries.
Date of Report: November 22, 2010
Number of Pages: 43
Order Number: R41478
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
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