I realized today for the first time that U.S. refiners are actually shutting down because they are losing money. How could that be? U.S. demand is down but supplies of oil are adequate and gasoline that can't be sold domestically can be sold for export. We actually import oil that we sell for export as gasoline. So how could refiners possibly be losing money?
Obviously their cost of their crude oil raw material is high, and this situation puts it into a perspective that just so many dollars per barrel could never do. And equally obvious is the fact that "drill baby drill" doesn't help when refiners already have more oil than they can profitably refine.
So, what does that mean? It apparently means that gasoline is a commodity that at least against current economic pressures is structurally fixed at around $4.00 per gallon because of crude oil prices exacerbated by speculation. In addition to closing refineries, refiners are likely to store crude and wait for prices that will permit a profit, rather than continue to refine oil at a loss. It is hard for me to demonize that thinking. Seems like a rational plan for survival.
This is not the type of market a rational country would opt for to supply its energy needs for the long term, if more sustainable options are available.
In the current economic climate it is also difficult to imagine a scenario where this recipe for high gasoline prices would change much at all, without major legislative action which is not going to happen.
There are many reasons why we need to develop alternate sources of energy, but undeniable financial realities are the most convincing.