Oil tops $67 as US demand soars
"The petrol and gasoline situation in the US is probably the most worrying factor at the moment," said Simon Wardell, at Global Insight. "It looks like it could be an ongoing problem, because a shortage of refining capacity is not something that can be resolved quickly."
In the world of energy psuedo-experts, the foolish idea that we are desperately short in refinery capacity has become entrenched. This idea makes little sense and is a good way to identify snake oil salesmen.
First, as SW points out,
All of those calling for a build out in refining capacity are bat shit crazy. You don't make an investment to process a raw material that will not exist by the time the project is completed. The world does not need to have the ability to refine 90 million barrels of crude oil per day because we will never produce 90 million barrels of crude oil per day. What does make sense is the conversion of some of our refining capacity to deal with the increasingly poor quality of the remaining crude oil.
However, further, if there really were a huge surplus of of oil, which COULD NOT BE SERVICED by refineries, than the price of a barrel of oil would likely drop. We'd be drowning in the stuff, natch. Millions of barrels of oil, morosely waiting to be refined into something useful.
This implied surplus is a myth.
The bean counters at the oil companies have built the exact refinery capacity that is needed. Sure, things get squeaky tight from time to time, but demand for oil (not gasoline; OIL) has not dropped and will not drop...
...but production sure will.