Oil Prices Sag Yet Pump Keeps Zooming; Lack of Oversight Means ‘Double Whammy for Consumers’ and Economy This Summer, Says Group
Santa Monica, CA — U.S. gasoline prices rose more than 33 cents a gallon to $3.937 in the last month despite driving cutbacks that have steadily reduced demand, said Consumer Watchdog. Oil prices sagged today along with U.S. economic indicators; yet even if they continue to fall, motorists are unlikely to see much relief at the pump — or at the grocery story, with diesel breaking the $5.00 mark.
“Producers who have been making their record profits from drilling and selling oil are now trying to do the same on the refining end by keeping fuel supplies short in the summer driving months,” said Judy Dugan, research director of the nonprofit, nonpartisan Consumer Watchdog. “High oil prices, combined with a drive to increase refinery profits, will be a double whammy on consumers this summer.”
In recent months, refiners have cut back their production to match drops in consumer demand and prevent retail prices from dropping. This May, U.S. refineries have operated at an average of 86.5% of their maximum, while the modern average for May, especially before last year, was about 95%. (See weekly refinery utilization averages since 1990 here and historic monthly averages here.)
National gasoline prices hit $3.937 on average today, according to both AAA and the federal Energy Information Administration’s weekly gasoline report. Diesel was about 40 cents a gallon higher than gasoline, and in high-priced California now averages $5.124. Some stations in the state are selling diesel for $5.50 a gallon and up, impacting the cost of almost all goods and food.
“The speculative frenzy in oil prices may be cooling slightly, but consumers are unlikely to benefit,” said Dugan. “Congress is talking about getting speculation under control but should not ignore the role of refineries in price spikes just because pump prices have recently been driven by crude oil prices. Unless government also oversees refineries and the national supply of gasoline and diesel, consumers and the economy won’t seen the benefit if crude oil prices decline.”
Consumer Watchdog noted that major oil companies reaped record yearly profits from their refining businesses in 2006 and 2007, at some points likely profiting by $1.00 or more a gallon just on refining. This drove pump prices to then-records at a time when oil cost half what it does now.
“Refineries want to boost their profits in the summer,” said Dugan. “With drivers cutting back and truckers going bankrupt it’s still business as usual for oil companies, even if it means wrecking the economy.”
For more information, see www.OilWatchdog.org
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