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New South Dakota Oil Refinery

The other day, Union County, South Dakota voted to allow rezoning land in preparation for a new oil refinery.
This would be the first oil refinery constructed in the US since 1976.

There has been a lot of talk about rising gas prices lately, and everyone is very eager to point a finger at OPEC for not increasing production, or at the president for his bungled middle-east policy, or even at the average American for his thirst for cheap gas to fund his “suburban sprawl” lifestyle. All of those things surely play big parts in this mess.

But refinery capacity is an overlooked piece of the puzzle. When we import crude oil, there’s not much you can do with it until you refine it into its various products.

I anticipate that this will not be viewed as a celebrated accomplishment in the minds of some of our readers. I expect I will see comments along the lines of the ones posted underneath the original article calling me a wingnut for being happy that we are finally expanding oil refining capacity and admonishing me to give up my hopeless adoration of the automobile and embrace a green-pedestrian friendly lifestyle.

But let me tell you something – oil goes into more than your automobile. It can be used:

to form materials such as plastics, detergents, solvents, elastomers, and fibers such as nylon and polyesters. Petroleum fossil fuels are used in ship, automobile and aircraft engines.

Now, if you think about it, that’s a lot of stuff. That short little list encompasses everything from the clothes on your back, to the chair you’re probably sitting in. So, whether or not you drive an automobile, oil needs to be refined, and the increasing demand coupled with no increase in refining capacity creates a chokepoint that drives up the cost of everything.

Our dorky little brother StreetsBlog will probably claim that this is bunk, and that alternatives for these materials exist, and that may be true, but let me point out two things:

Currently oil carries the load for some of the products that have alternative material sources – if everyone drops oil-products overnight and switches to the other stuff, we won’t have the capacity to meet the new demand and prices will go through the roof.

Next, whether you switch to alternative materials or not, one thing that currently cannot be replaced is the gasoline powered automobile (or diesel powered truck). Now StreetsBloggers may attack me over this post, but they would be wise to consider that their little dream of a pedestrian friendly paradise wouldn’t even exist without the capacity to carry enough food from far enough away to feed the 8+ million people in New York.

Think you’re not affected by the gas prices because you live on Manhattan and ride a bike? Think again, because the price of gas also affects the price of your food. So it makes absolutely no sense to be against expanding refining capacity.

Don’t believe me that this is affecting everyone? Take a look at this article about gas thieves.  What do you think happens to the cost of your Wheaties when the truck company carrying them gets ripped off and loses $750 in gas on one run? You think they’re going to absorb that cost? Nope. Insurance will cover it? Sure, and insurance will raise premiums, which will in turn cause the company to raise prices.

So don’t be too vitriolic in your hatred of the citizens of South Dakota. As the demand for oil has steadily increased, refining capacity has been flat. We’re currently operating close to 90% capacity. This new refinery is a good thing, and the citizens of Union County just took a big step toward doing us all a huge favor.