Oil industry scales back refinery plans as US pushes for biofuels

Mumbai: A US push for biofuels such as ethanol has prompted the oil industry to scale refinery expansion plans, which could in turn keep gasoline prices high, possibly for years to come.

President Bush has called for a 20 per cent drop in gasoline use while the senate is debating legislation for huge increases in ethanol production.

Oil companies and industry executives see growing uncertainty about future gasoline demand and little need to expand refineries or build new ones. As demand for gasoline is expected to fall over the years with increased production and consumption of ethelene, they no longer believe that investment of billions of dollars in refinery expansions is warranted.

Biofuels such as ethanol and efforts to get automakers to build more fuel-efficient cars and SUVs have been portrayed as key to countering high gasoline prices, but they are likely to do little to curb costs at the pump today or in the years ahead as refiners reduce gasoline production.

A shortage of refineries frequently has been blamed by politicians for the sharp price spikes in gasoline, as was the case last week by Senator James Inhofe, R-Okla., during debate on a Senate energy bill.

"The fact is that Americans are paying more at the pump because we do not have the domestic capacity to refine the fuels consumers demand," Inhofe complained as he tried unsuccessfully to get into the bill a proposal to ease permitting and environmental rules for refineries.