Ethanol could keep price of gas high

Drevna, the industry lobbyist, said annual demand had been expected to grow to about 161 billion gallons by 2017. But Bush’s call to cut gasoline demand by 20 percent — through a combination of fuel efficiency improvements and ethanol — would reduce that demand below what U.S. refineries make today, he said.

“We will end up exporting gasoline,” said Drevna.

Asked recently whether Chevron Corp. might build a new refinery, vice chairman Peter Robertson replied, “Why would I invest in a refinery when you’re trying to make 20 percent of the gasoline supply ethanol.”

Valero Corp., the nation’s largest refiner producing 3.3 million barrels a day of petroleum product, recently boosted production capacity at its Port Arthur, Tex., refinery by 325,000 barrels a day. But company spokesman Bill Day said some additional expansions have been postponed.

“That’s not to say we’ve change our plans,” Day said in an interview. “But it’s fair to say we’re taking a closer look at what the president is saying and what Congress is saying” about biofuels. He said there’s a “mixed message” coming out of Washington, calling for more production but also for reducing gasoline demand.

“It’s something that we have to study pretty carefully,” said Day.

Ron Lamberty of the American Coalition for Ethanol, said all the talk about biofuels threatening gasoline production is the “latest attempt to blame ethanol or Big Oil’s failure to meet our energy needs.”

“The ethanol industry continues to grow while oil refiners continue to make excuses for maintaining their profitable status quo,” said Lamberly.

Sen. Byron Dorgan, D-N.D., said consolidation of the oil industry into fewer companies has left them with no incentive to expand refineries.

“It’s a perverted system that does not act as a free market system would act,” said Dorgan. “If you narrow the neck of refining, you actually provide a greater boost to prices which is a greater boost to profitability.”

Richard Blumenthal, the attorney general of Connecticut, wants Congress to require refiners to maintain a supply cushion in case of unexpected outages.

In the 1980s, Blumenthal said at a recent hearing, refiners were producing at 77.6 percent of their capacity, “which allowed for easy increases in production to address shortages. In the 1990s, as the industry closed refineries, ... (that figure) rose to 91.4 percent, leaving little room for expansion to cover supply shortfalls.”

AP

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