Oil's End? I think not.

There was an opinion piece in the NY Times today that is just outright wrong. Timothy Eagon misses the mark on so many angles.

Oils End? -New York Times

First of all, US refinery capacity according to the Department of Energy has risen to 17,385MM BBLs/day in 2006 from 15,671MM in 1985. Mr. Eagan is right when we claims there are fewer refineries. In fact there are about half as many. In 1982 there were 301 operating refineries in the US and that number dropped to 149 in 2007. So how is it that we have half the refineries and more production?

The answer is very simple. Refiners have found ways to be more efficient with every barrel of crude oil processed and they have found better, faster and cheaper ways of processing crude. The production "creep" is the result of careful investment in better technology. This has saved millions of barrels of crude since we have become more efficient with our energy.

The $4/gal cost of gasoline is also a little misleading. Government involvement in the form of taxes adds about $0.55/gal to the cost of gasoline. On top of this, State and Federal regulations makes blending gasoline very complicated, and thus costly. Chevron Corporation has over 700 formulations of gasoline in the US to meet all the different government mandates. Maintaining that many formulas is a huge burden and goes way beyond the 3 octane grades you see at the pump.

The Exxon Valdez incident was most unfortunate and a real tragedy. However, it is lawyers on the plaintiff side that are as much to blame. The longer they drag out the settlement, the more money they get to keep. I am sure Exxon would have desired to get this over with a decade ago.

Oil has allowed us to live a standard of living in this country that could not even be imagined 100 years ago. We should be thankful that oil companies have allowed us to live this lifestyle. The alarming thing now is that these companies are no longer in control of oil reserves. Today national oil companies in Russia, Saudi Arabia, Kuwait, Venezuela and other control over 90% of all reserves. I doubt these countries will make it easy to afford this same standard of living.