Pain at the Pump

Soaring gasoline prices are hitting us hard in the pocketbook. Gas prices have reached nearly $3.90 a gallon locally - even more in smaller Basin communities. And there doesn't seem to be any relief in sight.

The spike couldn't come at a worse time. Our economy is struggling to recover, and analysts say that costlier gas is holding it back even as the job market improves. Nearly two-thirds of U.S. economic growth is directly tied to consumer spending, and that spending drops as gas prices rise.

Remember 2008, when gas prices shot up 50 percent in nine months? When the price of a barrel of crude went up to $147? When local gas prices topped $4.26? Of course you do. And we all recall the global recession that they helped trigger. The same thing happened last year, as oil prices rose again and the recovery was stalled. Should we just get used to paying more?

Some energy analysts say we should. They point out that prices tend to rise in the spring and peak out in May, just before the summer travel season. And many economists believe that gradual increases allow consumers more time to catch up.

But there are other factors, some good, some bad. The good news is that Americans are driving less and more efficiently, which lowers fuel demands. What's more, our oil production is up to 5.6 million barrels a day, the highest rate since 2003. We're the world leader in refining crude into usable fuel. But we can still do more. We can explore, develop and drill off the Arctic coasts of Alaska. We can keep raising fuel efficiency standards, jumping renewable-energy output, and adding incentives for weatherization. The president has announced he's opening more offshore areas to development, and there's still the Keystone pipeline to be reconsidered.

So if supply is up and demand is down, why is the stuff so dang expensive? Well, for starters, U.S. consumption isn't all that affects prices. Globally, demand is up to around 89 million barrels a day and rising, according to the International Energy Agency. Iran keeps threatening to shut off the Straits of Hormuz and stop the shipping of a fifth of the world's oil supply. The European refiner Petroplus has filed for bankruptcy and Libya is still reeling from its civil war. Unrest in Sudan, Yemen and Syria has cut production by about 340,000 barrels a day. Meanwhile, Japan's earthquake shut down nearly all of its nuclear power plants, which means they have to import more oil, and China's demand is expected to rise as well.

Here at home, it's not all about supply and demand either. The cost of crude is only a little over half the price of gas. Taxes, refinement and transportation make up the balance. While crude continues to flow, there aren't enough pipelines to move the stuff to the refiners.

That's hurt refiners in the Northeast especially. In 2010, the East Coast had 12 refiners, according to the Energy Information Administration. Since then, four have either closed or been idled, and more will follow this year. Why are eastern refiners hurting so badly? It's just too expensive to transport the high-quality oil from middle America, especially with a pipeline infrastructure desperately in need of upgrading. So they have to buy more expensive oil from overseas and swallow the transportation costs too. The profit just isn't there. So the region is running almost a quarter-million barrels a day short of what they need.

Here in the Northwest we're not hit as hard, but we're not immune either. A fire at BP's Cherry Point refinery last January cut Washington's production by a fifth, and the refinery is still idle. Two refineries in Billings, Mont. are challenging crippling tax assessments. Decreasing valuations and expensive air-quality mandates have made profits so thin that refiners simply can't keep producing fuel. And that means higher prices. Not just for gas, but for everything.

We can't continue like this. The economy is struggling to stand up, but gas prices are likely to knock it back on its rump again. As much as we do to reduce American demand, world consumption is still outpacing our supply. We need long-term solutions, and we need them quickly.

- Editorial board