WASHINGTON -- Everyone knows the United States relies heavily on foreign oil. But most people don't realize the nation also increasingly needs imported gasoline -- a trend that's contributing to the recent spike in prices at the pump.
The creeping dependence on imports leaves the country more vulnerable to international supply disruptions and exposes the growing inability of domestic refiners to provide relief when markets get tight.
More than half the nation's refineries have shut down since 1981, no new ones have been built and none are planned. Moreover, the industry has kept capacity growth at remaining facilities to a minimum, despite rising demand.
Domestic refiners no longer have the wherewithal to produce enough gasoline to meet peak summer demand. U.S. gasoline inventories are nearly 8 million barrels below the 5-year average at this time.
The United States now imports upwards of 1 million barrels a day of gasoline during the peak summer driving season, more than twice as much as it did 20 years ago, according to government statistics.
Lately, though, gasoline imports have been "lower-than-expected" given the sharp increase in demand, according to the Energy Department, whose statistics show that foreign shipments were more than 100,000 barrels a day below year ago levels in April.
This has exacerbated the supply crunch. Other factors underpinning today's lofty gasoline prices include: geopolitical instability, speculative buying on futures markets and the high cost of oil, which accounts for roughly $1 out of every $2 motorists spend at the pump.
Another factor making the U.S. gasoline market tighter and more volatile is the industry's systematic reduction in the amount of fuel kept in storage.
Advances in information technology and logistics have enabled the industry to operate efficiently with less of a cushion. Further, when prices are high, refiners prefer to sell existing inventories as quickly as possible.
Of course, this leaves less margin for error and contributes to the anxiety in the marketplace.