“They don’t have to collude, they don’t have to form a cartel, they don’t have to be monopolists,” Stanford University economist Roger Noll said about oil refiners in California a few years back. “All they have to do is take advantage of the crazy rules.”
“The crazy rules” are the environmental regulations and clean fuel mandates imposed by state and federal lawmakers. [bold, links added]
The regulations crowd out smaller competitors, drive consolidation, and keep out new entrants.
If that sounds bad to you, it sounds great to the large refiners.
“Make no mistake about it,” said Thomas O’Malley, a refinery executive who lobbied for stricter clean fuel rules. “The more stringent you make specifications, those become barriers to entry. Strong companies would have an advantage.”
We are today reaping the bitter fruit of environmental regulations that have driven massive consolidation in the refining industry. President Joe Biden now claims to be upset about that.
— Zeke Miller (@ZekeJMiller) June 15, 2022
Biden isn’t wrong that refineries are a bottleneck on fuel production and that refinery capacity has been higher in the past.
“Reduced refinery capacity,” notes liberal journalist David Dayen at the American Prospect, “in large part triggered by industry consolidation, has been a major factor” in high gas prices.
But what is behind that “industry consolidation”? Barriers to entry, especially regulations that drive out small players and protect the large incumbents from competition.
These are exactly the sort of barriers to entry Biden administration continues to support — that Joe Biden has spent his career erecting.
One small example is the federal ethanol mandate. Although it allows exemptions for small oil refiners, the Biden administration regularly denies applications for such exemptions — he denied 65 such petitions just this winter.
Had Biden set out explicitly to cause refinery consolidation, he probably wouldn’t have governed any differently as a senator or as president.
Now, he’s pretending to be upset that this concentrated industry is protected from competition and has high costs and high profits.
Read more at Examiner
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