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Ethanol push may keep pump prices up

June 18, 2007|From the Associated Press

WASHINGTON — With Congress and the White House pushing to increase the use of biofuels such as ethanol, the oil industry is scaling back its plans to expand refineries -- which could keep gasoline prices high.

President Bush has called for a 20% decline in gasoline use by 2017 and the Senate is debating legislation for huge increases in the use of ethanol as a motor fuel. So oil companies see a growing uncertainty about future gasoline demand and less need to increase refinery capacity to make more gasoline.

A shortage of refineries frequently has been blamed by politicians for the sharp increases in gasoline prices.

This spring, refiners, hampered by outages, could not keep up with demand and imports were down because of greater fuel demand in Europe and elsewhere. Despite stable -- even sometimes declining -- oil prices, gasoline prices soared to record levels and remain above $3 a gallon in much of the nation.

Consumer advocates say the oil industry likes it that way.

"By creating a situation of extremely tight supply, the oil companies gain control over price at the wholesale level," said Mark Cooper, research director at the Washington-based Consumer Federation of America.

But oil companies already have scaled those expansion plans back by nearly 40%. More cancellations are expected if Congress passes legislation now before the Senate that calls for the use of 15 billion gallons of ethanol by 2015 and more than double that by 2022, officials say.

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