Why does refining capacity in the United States affect world crude oil prices?
The news services are using “refinery capacity” as an answer for rising crude prices. You are correct in your assumption that limited refinery capacity would affect prices at the pump, but not crude prices. One of the main causes of the increases in crude prices is basically demand. China and India (which have 1/3 of the world’s population) are coming online as major energy consumers. These countries are experiencing booming economies and new wealth and their citizenry are demanding all the goods that the west has enjoyed for so long – and this takes energy, thus crude demand is going up. The second major reason (the one the media won’t touch) is the falling US dollar. Since 2002, the dollar has fallen some 34% in value against the major world currencies (about 65% against the Euro). As the dollar devalues, crude prices are going to go up. Now, people will say “Hey, crude sales are denominated in dollars, thus there is no foreign exchange and a depreciating dollar is irrelevent”. That’
