The Real Reason Biden’s Plea to Saudi Arabia Won’t Ease Gas Prices

As the Biden administration continues to plead with OPEC autocrats to pump more oil, a massive and complex problem stands in the way of any new supply affecting prices at the gas pump. (RELATED: The View Through Debbie Stabenow's Windshield)

America's — and the world's — ability to refine crude into gas, diesel and other end products is in rapid decline. And given the economics of refining — including the green incentives to produce some products rather than others — the decline may be irreversible.

According to a Bloomberg News report:

During the pandemic, plants that distill crude into gasoline, diesel, and jet fuel shut down around the world, and construction of new ones was postponed. The closures were especially acute in the US, where old facilities suffered irreparable damage from breakdowns and hurricanes while others were converted to produce renewable diesel. Over the past three years, the nation's refiners have shut—or announced plans to shut—about 2 million barrels of capacity a day, wiping out enough gasoline production to fuel an estimated 30 million cars.

About the “renewable diesel”:

About a third of the refinery shutdowns in recent years are a result of owners converting them to produce renewable diesel. This process will allow them to satisfy some environmental requirements while claiming a $1 tax credit on every gallon they produce.

That's your government at work, creating incentives that distort markets and hurt consumers. (RELATED: Biden Gas Prices Tweet Reveals Alarming Economic Illiteracy)

But the stupid government tricks don't end with perverse incentives. They include a heaping dose of economic illiteracy:

In June, as prices at the pump shot past $5 a gallon, Biden officials met with top executives from the nation's largest fuel-making companies. The comments they made, industry insiders say, displayed a woeful—perhaps willful—misunderstanding of the refining business. In one Zoom-based session with a refining executive, White House officials soberly suggested that, with profit margins so large, oil companies should be able to recoup the costs of a new refinery in a year.

That's…not how complex, heavily regulated — and politically disfavored — projects work:

The US hasn't built a full-scale refinery since 1977. Designing and constructing the labyrinth of pipelines, tanks, and distillation columns would easily cost $10 billion and take as long as a decade. There are some expansions under way by Exxon Mobil Corp. and Valero Energy Corp., but together they'll barely make up for the loss of a single refinery. Meanwhile, the sharp, pandemic-driven decline in fuel demand led to the announced shutdown or repurposing of at least six refineries, including LyondellBasell Industries NV's Houston facility, which is capable of making 3.7 million gallons of gasoline a day and is set to close by next year.

And then there's the story of the refinery Joe Biden tried and failed to save:

…in Philadelphia, not far from Biden's hometown, [which] used to account for almost a third of the refining capacity in the US Northeast. After running for more than a century, the site began falling apart. Aging equipment, more costly environmental regulations, and weaker demand contributed to heavy losses. Supporters of the refinery implored then-Vice President Biden to help save it from closure, but their efforts proved futile. It eventually succumbed to a series of breakdowns and explosions and is now being dismantled. There are plans to turn the site into an e-commerce and life sciences business park.

The bottom line: OPEC could start pumping oil at a breakneck pace tomorrow. But without refining capacity — for a host of economic and political reasons — it won't make a dime's worth of difference at the pump. And there's every indication the refining problem will only get worse.

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