I’ve read that no new oil refineries have been built in the U.S. since the 1970s. Why not? With oil companies making record profits, why haven’t they invested some of them to increase capacity?
Looks like this one is still a go: http://www.fox11az.com/news/topstories/stories/KMSB-20080204-apbp-refinery.8de370f6.html
They have. They have made the existing ones bigger.
Why not? NIMBY. Build it, but not near my (fill in the blank). While I have no first hand experience with the obstacles thrown in the way of such a plant, I do recall all of the extra studies, and delays caused by anti-nuclear power organizations, and the resultant additional costs incurred by PECo Energy when building the nuke facility at Limerick, PA.
We’ve covered this in many other recent threads. The short version is that it takes 10 years and billions of dollars to build a new refinery. What was the oil situation 10 years ago? The price of a barrel of oil was around $10. So what record profits are you talking about?
The oil industry did put money into new refineries after the oil price shocks in the 70s. Then the price of oil plummeted throughout the 80s, the U.S. cut demand, the world was awash in cheap oil, and the oil companies lost all the billions they sunk into useless refinery capacity.
It’s useful now, true, but unlike you they have to look ten years into the future. Everybody is predicting that demand for oil will drop, millions of hybrid or electric cars will be on the road, everybody will be cutting demand for power as fast as they can, and its possible that the oil peak has been reached and less and less oil will be coming out of the ground. And they’re supposed to sink billions into refineries that will only come on line in that kind of world?
It’s not quite that cut and dried, of course, and probably some small number of refineries will be built. Somebody will take the chance that all or much of the above is wrong and that the rewards if nobody else builds one makes the risk worth it.
But the oil companies know that while everybody screams when they make “record profits” nobody pays any attention when the price drops and the profits go away. Except them.
This is not a defense of the oil companies, but a simple wish that more people would take the time to understand supply and demand and the cyclical nature of business.
Oil doesn’t come from oil refineries, it comes out of holes in the ground. I suppose if the price of peanuts tripled tomorrow the first thing you would do is build more peanut butter factories?
They have. But increased capacity does not require new refineries; it’s cheaper to increase the capacity of existing ones, which is exactly what they’ve done. Also there are fewer regulatory hurdles and less nimbyism to counter.
That article points out the NIMBYism. They had to change the location because of protests.
Besides, the oil companies have long been content to do a lot of their drilling, pumping, and piping in places where it was cheaper, and the locals are easier to bribe. “In my backyard? Of course, my friend! You and your fat envelopes are always welcome here.” 
Similar thread from three weeks ago.
Right, all other things being equal, one would expect that an increase in oil prices decreases demand for gasoline and other products, and makes oil refineries less profitable.