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U.S. Refiners May Step Up Diesel Production in 2006

Short supply and rising prices may prompt U.S. refiners to increase production of diesel fuel, with the blessing of a new bill passed on Friday that provides incentives, including loosened Clean Air requirements.

Edited From and Reuters

U.S. refiners may step up production of diesel fuel, next year. The distilled fuel, which is more expensive than gasoline, was in even smaller supply this year, due to strong demand in Europe and Asia, and the damage done by Hurricanes Katrina and Rita. Twenty plants on the Gulf Coast were shut down at one point, according to a report at Three refineries, accounting for about 5% of refining capacity, are still offline. Data from the Department of Energy shows that distillate supplies are at the lower end of the average range for this time of year.

By a narrow margin of two votes, back in October, the U.S. House of Representatives passed a bill giving U.S. oil refineries incentives to expand. The legislation, written by Republican Joe Barton of Texas, wants to add 2 million barrels per day of capacity. It offers abandoned military bases for refinery construction sites;  federal insurance for refiners whose projects are delayed by lawsuits or regulatory snags; and looser Clean Air requirements. The Department of Energy would be in charge of processing permits. The bill is pending Senate approval.

"No refineries have been built in our Nation since 1976, and the recent disruptions in supply from Hurricanes Katrina and Rita have demonstrated that additional refining capacity is critically needed," President George Bush said in a statement. 

Diesel prices are up 17% over last year.