Is it true that a contributor to the high cost of gasoline is due to the lack of refineries?

Question

And if that is true then given the record profits one would wonder why the oil companies would not invest in more.

Answer 1

A Refinery costs about $1/billion dollars and the amount of money you make off selling processed crude oil is peanuts.

For instance a barrel of oil might cost $115. Thats 42/gallons at a cost of about $2.73/gallon for Crude. Of that, about 20/gallons can be refined into gasoline. So the base value without factoring in costs for the refinery, gasoline's value is $2.73. At the moment, the NYMEX's spot market for gasoline has a value of $2.88/gallon. That means a refinery "at best" can only earn $0.15/cents per gallon of revenue on every gallon refined from oil to gasoline.

So then you have to ask yourself, how many gallons of crude need to be refined to recoup your $1/billion dollar investment?  Now you see the reason why nobody is jumping on the "build refinery" bandwagon. Its expensive and the return on investment is pennies on the dollar. Without a Government subsidy or something, its just not worth it to build refineries.

Answer 2

The high price of Gasoline is a contrived farce. Governments are regulating how much oil is being extracted, and what the price is. Just take a look at Alaska for christ's sake. A LAND FULL OF OIL! and the american government won't touch the ******* thing. Look into it a bit more. And don't take the media's take on it lightly.

To answer your question from a normal standpoint, no it's not. No matter how many refineries there are, they can only do so much. And besides that, the rarer a product is, the more it'll cost.

Common sense mate ;)

If they gave a d**n, there wouldn't be a "high cost of gasoline"

Answer 3

From time to tome  when there are disruptions, the lack of refineries cause the price to spike because there is no excess refining capacity. After Katrina  it was the problem, but mostly  it  the high price of oil.

Answer 4

It may be part of it, but I don't think it's a major factor.