PANAMA CITY, Panama – Sometimes the real estate maxim "location, location, location" says more about politics than geography.

Panama wants to be an energy hub of the Americas. Occidental Petroleum of California, Qatar Petroleum of the Middle East and some European and South American investors are pondering whether to build refineries here ­ not just because Panama gives you easy access to both the Pacific and Atlantic oceans, but because Panama is saying yes to refineries when the United States says no.

Gasoline prices have shot up and down this summer largely because refineries haven't kept up with demand. Lingering maintenance requirements compounded by Hurricane Katrina damage have caused several shutdowns this summer. We import millions of gallons of gasoline every day, but demand from other parts of the world means there's not enough refining capacity.

One of the causes of the U.S. refinery shortage is the penchant for what some call BANANEM ­ "Build Absolutely Nothing Anywhere Near Me."

Enter Oxy and the Qatari government's national oil company. They are studying whether to build a 350,000 barrels per day refinery on an old Chiquita banana plantation in Panama's Pacific southwest.

"Refining capacity is constricted in the United States," said Dan Kornfield, a Latin American specialist at the Austin consulting firm STRATFOR. "If Panama could secure a steady oil source from nearby, a refinery there could be profitable."

But even Panama's welcome mat has a few twists that could trip up an investor. Expansion of the Panama Canal and a boom in high-rise condos means there's construction work for thousands of Panamanians, but the 10,000 workers needed for a refinery are a special breed. It's sophisticated work with pressure vessels, miles of pipelines that carry large volumes of distilled petroleum products at high temperatures, and dense ganglia of electrical and computer systems. The people who do this work are in great demand at petroleum projects around the world, and costs for this work have risen by two-thirds in the last 30 months.

Oxy and Qatar Petroleum said in May that the refinery might cost $7 billion. The oil company partners are doing a feasibility study for the refinery that one U.S. diplomat in Panama City said is already struggling with far higher costs estimates that could keep the project from going ahead.

Panama's legal system presents its own challenges. Under Panamanian law, anyone who feels injured by a construction project owned by foreign investors can seek a "sequestration" order from a judge requiring the investors to post a bond equal to claimed damages or lose the use of the project.

In February, the trans-Panama pipeline known as Petroterminales de Panama (PTP) spilled about 5,000 barrels of crude oil near the Pacific. A lawyer for an indigenous tribe claimed the spill would create 50 years of harm worth $500 million, and he got a judge to issue a sequestration order against the pipeline.

The order tied up the pipeline, which was built to transport Alaskan crude oil to Atlantic coast refineries, until July, when a Panamanian supreme court justice threw it out. It was a lesson for foreign investors, however, that has cooled enthusiasm for Panama's energy hub ambitions.

The U.S.-Panama free trade agreement negotiated by the Bush administration calls for international arbitration in these sorts of cases. American investors say that would do much to strengthen the rule of law in Panama, where judicial corruption is considered a major problem.

"The way it is now, if you have to go to court, it's game over," said Paul McBride, CEO of the Prima Panama development company.

While Panama's congress has ratified the free trade pact, the U.S. congress has yet to act on the pact. U.S. labor unions have raised objections that House Democrats are seeking to address.

The fate of the trade agreement, however, could well have a bearing on future petroleum investments in Panama -- and future U.S. gasoline prices.