The price of filling up on fuels is getting very uncomfortable again. Some see this as a short-term situation that can be blamed on speculators, or world events. Some see it as not enough drilling. It is more complicated than that. We have a long neglected problem that requires congressional attention. The supply chain for the Northeast is jeopardized by refinery closures and a lack of sufficient pipeline capacity to efficiently deliver enough refined products from Texas. Some of the problem has been a problem my entire life. I think it's time we wake up and do something about it.
Gasoline has jumped by 20 percent this year to a national average of $3.922 per gallon, according to the auto club AAA's Daily Fuel Gauge Report.
Pump prices have risen along with crude oil, the raw material that gets refined into gasoline and other fuels. Brent crude, which is used to price most of the oil used by U.S. refineries, has jumped by 14 percent this year. By comparison, benchmark U.S. crude has increased by just 4 percent. The increases are largely due to a dispute over Iran's nuclear program that has raised fears of a disruption in Middle East supplies. But the price of fuels could start rising in connection with refinery issues. And do we have refinery issues here in the Northeast?
Yes we do. A recent Autoguide.com report cites CNN Money and stated, "Nearly 50 percent of the refineries on the East Coast have either shut down or may shut down in the coming months being unable to compete with the Gulf Coast facilities that can use cheaper oil."
But refinement capacity isn't the only problem for the Northeast and Rhode Island. Our Northeast supply chain relies too much on imported oil:
The older refineries are unable to process the cheaper, heavier types of oil that are coming in from Canada's oil sands, Saudi Arabia, and Venezuela. Currently the majority of the East Coast refineries can only process the light, sweet crude oil from West Africa and the North Sea. Refineries along the Gulf Coast, however, have been updated to support the heavier, cheaper oil.
There are no pipelines providing the cheaper domestically produced crude to the Northeast refineries. There is a major pipeline, the "Colonial," that delivers finished petroleum products from the Texas refineries throughout the eastern seaboard into the New York market, but together the remaining Northeast refineries and the Colonial pipeline don't have the capacity to meet all of the demand.
There could be a shortage of capacity to meet demand. One source shows numbers that look like an 18 to 19 percent shortfall in capacity. If that observation is correct, that percentage applied to $4 per gallon gasoline suggests $4.72 per gallon.
The U.S Department of Energy is much more optimistic, predicting an average price of about $3.95 this summer with a peak in May of $4.00. A little more saber rattling over Iran, or a Texas hurricane landfall could push the price higher. So in the short term, this summer we face a significant possibility of easily exceeding the U.S. Department of Energy's estimate of $3.95 per gallon. But this short-term problem could be an over the winter problem in home heating oil andback next summer and the circumstances suggest we need to do more to improve our petroleum products supply line to the Northeast.
We need to improve our Northeast supply chain to free it from substantial dependency on imported oil. We should aim to tap into cheaper more stably priced domestic and American oil, such as West Texas Intermediate (WTI) crude oil available to Texas refineries. This might require a pipeline to provide WTI crude to Northeast refineries. That could help them to stay in business and save good union jobs.
Alternatively, the solution may be to increase the pipeline capacity to bring more Texas refined product to the Northeast, presumably by the construction of an additional pipeline. While these are private enterprise initiatives, the government and your congressional leadership should be provocative of the most feasible effort, and be ready, willing and able to facilitate these improvements.
As we look for ways to help every Rhode Islander, let's not forget that refined petroleum products still put the muscle into moving our vehicles and our trucks. Many in Rhode Island rely on home heating oil for heating in winter and hot water year-round. Our oil fuels supply line has been too vulnerable and too reliant on imported oil for too long and it's time your leadership possessed a sense of urgency to see the supply chain improved so as to assure all Rhode Islanders of the benefits of stable supplies of gasoline at affordable prices. Stable, lower gasoline and home heating oil prices, assured by an improved Northeast supply chain, will help every Rhode Islander and our economic outlook.
Michael J. Gardiner is a Republican candidate to represent Rhode Island's second congressional district in the United States House of Representatives.