Katrina taught lessons on publicís need for oil
The gradual drop in gas prices after record highs a week ago helps pocketbooks, but it also creates a risk that the nation will forget lessons that were clear immediately after Hurricane Katrina.
Lesson 1: The U.S. economy is heavily dependent upon petroleum. Lesson 2: This nation is in dire need of more refinery capacity.
Lesson 1 should be a spur to action. To the extent the public ponders our nation's need for petroleum at all, it is with the vague sense that we can develop alternative fuels after our access to crude oil ends. The post-Katrina oil panic makes clear that our economy cannot handle a gap in energy supply. Shortages in oil hamper the transportation of goods and people, which, in turn, destabilize our economy.
Lesson 2: We are in desperate need of more refinery capacity.
No significant refinery has been built in the Unites States for three decades. That leaves existing refineries laboring at the peak of their capacity. Any glitch in supply therefore triggers price jumps and leaves consumers with shortages.
Capitalism is the salve that cures most economic woes, but it has not succeeded in the area of refineries. The public's expectation that any refinery must operate without unduly damaging the environment is one reason capitalism has not worked. Another reason is that the Organization of Petroleum Exporting Countries has the power to reduce the price of refined oil products at will. That power leaves U.S. companies unwilling to expend massive dollars on a refinery that may not be profitable when built.
Hurricane Katrina underlined the public's need for increased refinery capacity. Either through loan guarantees or tax incentives, it is time for the U.S. government to step in. The public need for additional refineries is greater than the private benefit to the oil industry.