Blowback From Katrina

Bush tries a P.R. approach. Basic problems of health care, jobs, housing remain

Bush repeatedly alludes to a shortage of crude oil, which he sought to mitigate by releasing part of the nation's strategic petroleum reserve. (In last week's speech, he acknowledged that the industry now is back on its feet and doing well.) In fact, there is no shortage of crude, but a surplus. The Petroleum Economist, in its September issue, says Ed Galante, senior vice president of ExxonMobil, addressed "the perception" earlier this year. The industry journal quoted Galante as saying, "Despite the number of refineries in the U.S. dropping more than 50 percent—from [a peak of] 325 in 1981 to about 150 today—total capacity has decreased by only 10 percent. [And] over the same period, refinery output is up by about 25 percent."

Rather than build a slew of new refineries, the industry is pulling supplies from elsewhere around the world. Western Europe, which is moving more and more to diesel, is one growing source; Russia supplies refineries there, and fuels will also come from such places as Iran (with whom we don't trade), Kuwait, and Saudi Arabia.

The Bush administration aimed to rely less on foreign sources, but in reality, its reliance will grow, not diminish. The one new American refinery on the horizon is scheduled for construction in Arizona's Yuma County, not far from the Mexican border, by a private company called Arizona Clean Fuels (ACF).

"Up to now, it had been thought that U.S. environmental regulations made the construction of a new refinery impossible," says Petroleum Economist, "but ACF disagrees. Glenn McGinnis, the firm's chief executive officer, told Petroleum Economist last month that the Clean Air Act operating permit had been issued in April—after a four-year application process. The environmental-impact statement, for which the Bureau of Land Management is the leading agency, is under application." The refinery will draw its crude oil from Mexico via a pipeline.


Additional reporting: Isabel Huacuja and Ali Syed

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