Environmental Standards Don't Reduce Refinery Capacity

Oil companies can build refineries now if they want. But they don’t, because they make more money when they dictate supply and keep prices high.

As the Natural Resources Defense Council [1] explains: "Although refinery capacity is a factor in today's higher gasoline prices, environmental regulations are not the reason for tight refinery capacity, according to the DOE, the Environmental Protection Agency, the General Accounting Office, and even oil industry executives. Consider the market fundamentals: refiners reap higher profits when capacity is tight, so they actually have a disincentive to significantly expand production. In fact, oil executives have stated that the reason they did not expand refining capacity in the 1990s is that the low profitability of the business did not justify the investment."