As I just heard on CNBC, no less an authority than ExxonMobil maintains that oil refinery capacity in this country has grown faster than demand. While it is true that there has been no completely new refineries built in 30 years, existing refineries have been expanded. Offshore refineries have also been built in places like Aruba. So can we finally put this chestnut to rest?
Also, I will take issue with a popular diary from yesterday. Oil Prices are indeed manipulated on a worldwide basis....
OPEC is a cartel whose major purpose is to manipulate the price of oil. Such a cartel would be illegal under national or international law if it was composed of individuals or private companies. The multinational oil companies, however, are not OPEC's victims, but their collusion partners. There are fewer important oil companies than there are oil producing nations; you can number them on one hand, ExxonMobil, ConoccoPhillips, ChevronTexaco (note all the compound names), British Petroleum, Shell. They have more power than the OPEC countries. Some of the latter are pathetic. Nigeria, for instance, loses money net on the oil business because it spends more money for the refined products than it gets for its crude oil.
The muultinationals have long term contracts or production sharing agreements with OPEC. Both companies and contracts benefit when the spot price increases, because their cost is so much lower.
If their was truly international competition in the oil markets, there is no way that the oil companies could be making the obscene and unprecedented profits they are making.
Their used to be a remedy for this: antitrust laws. Standard Oil was split into many parts a century ago. It has been slowly aggregating again ever since.