Christopher Helman is the Southwest Bureau Chief of Forbes, based in Houston
It was a dour bunch of oil refining executives at the Deutsche Bank refining summit in Boston earlier this month. Too many U.S. oil refineries, too little demand for gasoline, and plentiful imports from European refiners have killed profitability. Three east coast refineries have been shut down in the past four months (first Sunoco, then Valero, and most recently Shell announced Jan. 7 it would shutter its Montreal refinery and turn the site into an oil terminal).
Deutsche Bank analyst Paul Sankey notes however that a bright light of hope came from keynote speaker Tom O’Malley, chairman of Swiss refiner Petroplus (and an industry legend who in 2005 sold Premcor to refining giant Valero Energy). O’Malley spoke of a plan that would not only put smiles back on U.S. refiners’ faces, but environmentalists’ too.
O’Malley said in his speech that the White House is considering the idea of levying a new import fee on oil and petroleum products coming into the U.S. He said that under this tentative plan imports of refined fuels would only be allowed from overseas refiners that could prove they met U.S. environmental standards for air emissions. This would level the playing ground between foreign refiners and U.S. companies, which have complained they would go out of business if forced to shoulder carbon taxes their overseas competitors weren’t subject to. (See my magazine story: How Carbon Bill Would Hit Valero Energy.)
Because this would be a fee, it would not be subject to World Trade Organization restraints. Sankey notes that this fee could be put in place by President Obama unilaterally because of his emergency power to aid economic recovery. And what kind of fees are we talking? O’Malley suggested raising the fees on foreign crude oil to $1 per barrel from 12 cents currently, and hiking the fee on refined products to $4 per bbl from 54 cents.
Incredibly, this could well be a government levy that both Republicans and Democrats, environmentalists and oil companies could agree on. Allowing imports only from clean refineries will mean cleaner gasoline. Reducing imports will mean more demand for domestically refined fuels, protecting American jobs. And everyone is in favor of reducing reliance on foreign oil, right?
Could this work? Got a better solution? Let us know.