Every election cycle the same conversation plays on cable news and social media. Gas prices are high, so the argument turns to Venezuela, Saudi Arabia, Iran, or domestic drilling. The assumption is that more crude oil automatically means cheaper gasoline at the station. It does not. Crude is the feedstock. The binding constraint is the processing capacity that turns that crude into finished products people actually burn. That constraint has a name in management theory. It is Herbie.

Eliyahu Goldratt’s 1984 book The Goal introduced the Theory of Constraints through a simple story. On a Boy Scout hike, the slowest kid, Herbie, sets the pace for the entire line no matter how fast everyone else can walk. Fix Herbie and throughput improves. Ignore him and every other improvement is wasted. In American fuel markets right now, refining capacity is Herbie. We have enough crude. We do not have enough slack in the plants that process it, and the policy environment that created that condition has been running for decades.[1]

How Many Refineries We Actually Have

As of January 1, 2026, the Energy Information Administration counted roughly 130 operable petroleum refineries in the United States with atmospheric crude distillation capacity near 18.16 million barrels per day.[2][3] That figure sounds substantial until it is stacked against history. In 1982 there were 301 refineries. We have lost roughly 171 plants, a decline of more than half.[4] Capacity barely rose—from about 17.9 million barrels per day then to the current level—because the industry consolidated. The average refinery grew from roughly 59,000 barrels per day to nearly 140,000.

Marathon’s Garyville plant in Louisiana opened in 1977 at about 200,000 barrels per day and now runs over 617,000. ExxonMobil expanded its Beaumont facility in 2023. Fewer doors, bigger rooms. Capacity peaked near 18.98 million barrels per day in January 2020 and has been sliding since.[5] Recent closures accelerated the drop. Phillips 66’s Los Angeles-area refinery (about 139,000 barrels per day) ceased crude processing in late 2025. Valero’s Benicia refinery (roughly 145,000–170,000 barrels per day) is scheduled to shut by spring 2026. Together those two plants alone remove several hundred thousand barrels per day of West Coast capacity in roughly a year and a half. Gross removals since 2020 total around 1.7 million barrels per day even after expansions elsewhere.[6][7]

Utilization, Slack, and Where the Barrels Go

Total operable capacity of 18.16 million barrels per day sounds adequate until you look at actual runs. In mid-October 2026, U.S. refineries were processing about 16.6 million barrels per day of crude—93.4 percent utilization for the week ending October 16. The five-year average sits near 87 percent. Over the summer of 2026 the fleet averaged more than 95 percent from May through September, the highest sustained rate since 1998.[8][9] When plants run that hard there is almost no spare capacity to absorb a hurricane, an unplanned outage, or a sudden demand spike.

Gasoline output is running near 9.8 million barrels per day while domestic gasoline demand sits around 8.7 million. The gap is filled by exports. The United States is now the world’s largest exporter of refined products, shipping more than 1.5 million barrels per day of diesel alone.[10] Those exports are not a conspiracy. They are rational responses to price signals in a market where domestic refining capacity is tight and global product markets are tight. The result is that domestic prices stay elevated even when crude itself is not the bottleneck. Diesel is the sharper pressure point. Harbor diesel crack spreads have run well above gasoline cracks for extended periods because global refining capacity has been constrained by events in the Middle East, Russia, and elsewhere at the same time U.S. plants are already pinned near full utilization.

Why We Do Not Build More

A modern large-scale refinery costs $10–20 billion and takes five to seven years to permit and construct under current rules. Environmental reviews, air permits, water permits, and litigation can kill a project regardless of engineering feasibility. Demand uncertainty compounds the problem. Investors looking at long-term electric-vehicle adoption curves and fuel-efficiency standards are reluctant to underwrite a fifty-year payback on an asset whose primary market is expected to shrink. The last major U.S. refinery built from scratch was Marathon’s Garyville plant in 1977. A small 45,000-barrel-per-day facility in Galveston that started in 2022 is the most recent addition of any size.

The industry responded rationally to the constraints it faced. Companies expanded existing sites where permits were easier and closed plants where compliance costs exceeded returns. That is not a market failure in the classical sense. It is the predictable outcome of policy choices that raised the cost and risk of refining relative to other uses of capital.

California as the Extreme Case

California illustrates the mechanism most clearly. The state has unique fuel specifications, limited pipeline access from the Gulf Coast, and therefore relies heavily on in-state refining or waterborne imports. Recent closures have driven prices well above the national average—California regular has been reported near $5.89 while the national EIA weekly average sat around $4.27 for the week of October 26 and AAA’s daily figure near $4.25. Ohio has been closer to $4.30.[11]

Valero’s CEO was direct: the regulatory and enforcement environment in California is the most stringent and difficult of anywhere else in North America, and the Benicia plant cost considerably more to maintain than the company’s other California facility. The company booked a large impairment before deciding to exit. Phillips 66’s decision followed a similar logic. A stack of rules—the Low Carbon Fuel Standard, cap-and-trade allowance costs, unique CARB fuel specifications, and groundwater remediation requirements—raised operating costs while making long-term expansion unattractive. Proposals that would have given the state energy commission additional control over inventory levels and maintenance schedules added further uncertainty. The asymmetry is striking: imported fuel does not face the same compliance costs as in-state refining. The regulation does not simply raise the price of the product; it makes continued operation of the plant less profitable than shutting it down and sourcing from elsewhere.[12][13]

Herbie, Policy, and the Parallel in Other Energy Markets

The Theory of Constraints applies cleanly. Find the bottleneck, understand what slows it, and address that constraint directly. Yelling at crude suppliers does not remove Herbie when the processing plants are already running above 95 percent. The same logic appears in electricity markets. Nuclear power has been constrained for decades by cost and permitting rather than physics. Solar and wind have become the cheapest sources of new generation in many regions, yet they do not produce when it is dark or calm. The system still requires firm, dispatchable capacity. Policies that make nuclear or additional gas capacity difficult to build leave the grid with its own Herbie—the absence of reliable firm power that can respond when intermittent sources drop.

In both fuels and power, the constraint was engineered. Twenty years of policy aimed at reducing fossil-fuel use made refining and certain forms of firm generation less attractive relative to other investments. Companies responded by allocating capital elsewhere. The resulting tightness is not an accident; it is the outcome the rules produced. Short-term measures—Strategic Petroleum Reserve releases, Defense Production Act funding, temporary import adjustments—can ease acute shortages, but they do not restore spare capacity. Prices remain elevated as long as global refining capacity stays constrained and domestic plants have little slack.

What Actually Moves Prices and What Voters Should Watch

The Iranian conflict and other geopolitical events affect prices, but mainly by providing cover for wider margins when the underlying system is already tight. Lost refining capacity in the Middle East, Russia, and elsewhere removed millions of barrels per day of product supply at the same time U.S. plants were running near maximum. The war did not create the domestic bottleneck; it exposed how little buffer existed.

Long-term solutions fall into two categories. One is regulatory reform that lowers the cost and time required to expand existing plants or build new ones—particularly the unique California rules and the broader permitting gauntlet. That directly addresses Herbie. The other is to accept that large-scale refining will not return under current rules and to accelerate everything downstream of the pump: more efficient vehicles, electrification where it makes sense, and firm low-carbon generation such as nuclear for the broader grid. The first path is faster but requires admitting that prior policy created the constraint. The second path is slower and does not require the same political acknowledgment.

In California the regulatory reversal is unlikely to come from the 2026 governor’s race. Recent polls have shown Democrat Xavier Becerra leading Republican Steve Hilton by roughly 20 to 27 points. No Republican has won statewide office there since Arnold Schwarzenegger in 2006, and even that earlier period did not dismantle the renewable-portfolio and compliance culture that has shaped refining economics. Managing the existing machine is different from removing the constraints that make new capacity unattractive.[14]

The Self-Imposed Constraint

People asking why gasoline is expensive should look at the rules that govern the plants that make it. Crude supply matters, but it is not the binding constraint when refineries are already operating at 93–95 percent utilization and refined products are being exported because domestic capacity is tight. The industry consolidated and closed plants because the combination of high capital cost, long permitting timelines, and ongoing compliance risk made additional capacity a poor investment relative to other options. That outcome was produced by policy. It can be changed by policy.

Smaller, more accountable government that focuses on clear, stable rules rather than continuous regulatory expansion would lower the cost of keeping Herbie moving. The alternative is continued high utilization, continued export of refined products, continued vulnerability to any disruption, and continued arguments about crude supplies that do not address the actual bottleneck. The numbers from the EIA, the closure announcements from Valero and Phillips 66, and the utilization rates reported this year all point to the same place. The constraint is in the processing step, and it was largely created by design.

Footnotes

[1] Goldratt, Eliyahu M., and Jeff Cox. The Goal: A Process of Ongoing Improvement. North River Press, 1984.

[2] U.S. Energy Information Administration (EIA), Refinery Capacity Report data as of January 1, 2026; secondary summaries including Apollo Technical and industry compilations citing EIA tables on operable refineries.

[3] EIA, “Today in Energy” series and related capacity reports noting refining capacity levels near 18.1–18.2 million barrels per day in the mid-2020s.

[4] Historical EIA data and industry summaries confirming approximately 301 operable U.S. refineries in 1982; contemporary counts of ~130 as of early 2026.

[5] EIA historical capacity series and reports on post-2020 declines, including effects of closures and limited expansions.

[6] Phillips 66 announcements (2024–2025) on cessation of operations at its Los Angeles-area refinery (~139,000 bpd) by late 2025; contemporaneous reporting from Reuters and company filings.

[7] Valero Energy announcements and regulatory notices (2025) regarding the Benicia refinery (~145,000–170,000 bpd) shutdown targeted for April 2026; company statements on costs and impairments.

[8] EIA Weekly Petroleum Status Report data for the week ending October 16, 2026, showing ~93.4% utilization; secondary trackers confirming the figure.

[9] EIA “Today in Energy” reports (2026) noting U.S. refinery utilization averaging more than 95% from May through September 2026, the highest since 1998.

[10] EIA petroleum product export data and market analyses documenting U.S. status as the world’s largest exporter of refined products, including significant diesel volumes.

[11] EIA weekly retail gasoline price data (week of October 26, 2026) and AAA daily national averages; state-level figures for California and Ohio from contemporaneous reporting.

[12] Valero CEO public statements (2025) describing California’s regulatory and enforcement environment as the most stringent in North America and citing higher maintenance costs at Benicia.

[13] Phillips 66 and industry reporting on the cumulative effect of California’s Low Carbon Fuel Standard, cap-and-trade, CARB specifications, and related rules on refining economics.

[14] Emerson College Polling, PPIC, SurveyUSA, and RealClearPolitics averages (October 2026) showing Xavier Becerra leading Steve Hilton by approximately 20–27 points in the California gubernatorial race.

Bibliography

Energy Information Administration. Refinery Capacity Report (various years, including data as of January 1, 2025 and January 1, 2026). U.S. Department of Energy. https://www.eia.gov/petroleum/refinerycapacity/

Energy Information Administration. Weekly Petroleum Status Report and related utilization data, October 2026.

Energy Information Administration. “Today in Energy” series on refinery capacity and utilization trends, 2024–2026.

Goldratt, Eliyahu M., and Jeff Cox. The Goal: A Process of Ongoing Improvement. North River Press, 1984.

Phillips 66. Public announcements regarding cessation of operations at the Los Angeles-area refinery, 2024–2025.

Valero Energy. Statements and regulatory filings regarding the Benicia refinery, 2025–2026.

American Fuel & Petrochemical Manufacturers. Annual refining capacity summaries drawing on EIA data.

Public polling averages and individual surveys (Emerson College, PPIC, SurveyUSA, and others) on the 2026 California gubernatorial race, October 2026.

Rich Hoffman

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About the Author: Rich Hoffman

Rich Hoffman is an author, political consultant, and strategic advisor based in Cincinnati, Ohio, and the creator of The Politics of Heaven—a unique framework that connects biblical theology, ancient history, and modern power structures to explain how moral alignment and spiritual forces shape global events. Blending real-world political experience with deep research into archaeology, UFO phenomena, and suppressed historical narratives, Hoffman offers compelling commentary on topics ranging from ancient civilizations and the Dead Sea Scrolls to modern populist movements, paranormal continuity, and leadership strategy in chaotic environments. As the author of The Gunfighter’s Guide to Business and the forthcoming Politics of Heaven, he brings a grounded yet provocative voice to media discussions, supported by firsthand experiences and a cross-disciplinary approach that bridges science, history, and theology. For interviews, speaking engagements, or expert analysis, visit richhoffmanbooks.com or contact directly via phone at 513-307-5815 or email at rhoffman@richhoffmanbooks.com.  If you’ve seen the movie, Disclosure Day and want to talk about it and the implications of Presidnet Trump’s UAP disclosures, let me know and we can bring some color to your coverage. https://richhoffmanbooks.com/media-inquiries-broadcast-topics-and-contact-info/?frame-nonce=ad51e7ecba I do have a firsthand UFO encounter to discuss.