Refineries in the Sky

I remember when, in 2003 and 2004, gasoline went from about $1.40/gallon to over $3 and then over $4/gallon, my conservative friends and their blog-o-sphere echo-chamber complained loudly and for a long time that the genesis of this pricing spike was NOT related to the increase in the price of oil, a price driven in part by the threat to our oil supply caused by the Iraq War, but rather was due to a lack of refining capacity.  That lack of capacity, so the echo-chamber, tin-foil hat theory went, was due to the fact that no new refineries had been built in the US in 25 years, and that was because of "over-regulation" by the US government.

From time to time, even today, you will hear this meme'.

And it's just that, a meme', a false-faced argument indicative of either ignorance or frankly, sophistry (willful disinformation).

In 2003, I pointed out to my friends across the aisle, that in fact the head of the what I recall was the US Petroleum Association (a woman who was the head of Texaco at the time if I recall correctly), said that in fact the number of US oil refineries hadn't been increased not because of regulation, but quite simply because they predicted demand well into the future and saw that after the "baby boom" generation died off, there simply wouldn't be sufficient on-shore demand to warrant the capital investment in creating new refineries.  Further, that while the number of refineries hadn't changed, the refining CAPACITY overall had increased by 25% since 1980.  She also said (iirc) that anyone who claimed a lack of refining capacity was driving the pricing in gasoline simply didn't understand the market.  To his credit, President Bush (W, not HW), never used this meme' as an excuse, and simply said the pricing for gasoline was "complex", apparently so complex that simple people couldn't possibly conceive of how it worked.  That was the line oil executives used when asked to testify before Congress - that the price of oil depended upon many things - most of which were so complex it wouldn't be possible to provide a full explanation.  That said though, there was and has been since, at least one executive who DID say that the price of oil speculation was quite significant.

At that time and since, oil (per barrel) has topped $125.  IIRC at that time, and I know since, the price of speculation was quoted as being responsible for probably $25-$40 of that overall price.  Not a lack of refineries, but instead the same issues of money manipulation and unregulated purchases driving the market needlessly and artificially higher than actual consumption-based demand warranted, much like the housing market in the same period.  The cost to US consumers was massive, tens of billions of dollars which otherwise could have been spent on food, clothing, vacations, etc.. but instead went into the pockets of speculators who did nothing other than purchase and sell futures contracts.  They never intended to take delivery, they had no refining capacity, and they certainly never intended to distribute.  They just "got paid" for recognizing a market which they could manipulate.  Among the worst offenders were the large investment banks.  If you can tell me how an investment bank was a "value-add" to the delivery process for oil, I'll be surprised.

Now there comes this.. http://www.cnbc.com/id/100943620

US oil refining capacity has become so prolific that in fact, as part of handling shale oil production, we have excess refining capacity, and sufficient excess refining capacity that we are becoming the "refining center for the world" as the article in the link quotes.

My question is, "How is this possible?"  Isn't it the case that US governmental regulation keeps us from having sufficient capacity.  Obviously the problem with the price of oil has been over-regulation keeping us from having this capacity, so where and how could this possibly have happened?

Perhaps these refineries and this capacity magically appeared DESPITE regulation.  I know, that must be it, it was aliens who gave us this capacity.  These refineries and this capacity clearly were floating on clouds.  These aliens built these refineries in the sky and DESPITE the most vigorous attempts by tree-hugging liberals, those darned aliens delivered those refineries to US based oil producers JUST in time to allow them to handle the refining of shale oil.

That must be it.  Good thing I was wearing my tin-foil hat, or I'd have never noticed.