Are Energy Companies Rigging Prices?

Published on

Fox News Network – THE O’REILLY FACTOR

O’REILLY: “The Factor” has been investigating the mysterious world of gasoline prices, which seem to jump around all the time and seem to be coordinated by competing gas stations, or are we paranoid? Joining us now from Los Angeles, a man who is also keeping an eye on the situation, Jamie Court, the executive director of the Foundation for Taxpayer and Consumer Rights.

Now, the last time we had you on here, you made a pretty compelling case, a stronger case than the oil person we had on here, that the oil companies indeed pull back supply from certain areas of the country in order to drive the prices up. You have more evidence on that?

JAMIE COURT, CONSUMERWATCHDOG.ORG: I think we have a lot of evidence. In the Midwest, we found through a study that it — as inventories were draining low toward last summer, there was fuel going away from the Midwest to other regions of the country. Our researchers have actually found ships being turned away on the open seas from product from United States port towns as supplies were running low in the continental United States, so there’s a lot of ways this plays out. But mainly what it is is a manipulation of supply.

O’REILLY: Who orders this ship to turn back, or not to dock in a certain town?

COURT: Well, that’s a great question, and it’s one that I think antitrust investigators should look at. We don’t have those answers. All we know is what the manifests of the ships tell us and which way they’re going. We don’t know who is making that call, but when you find out who is making that call, that’s when you can have criminal investigators come in. So, part of the problem is, no one is watching supply. There’s very little regulation of it.

O’REILLY: No, no one is watching it. So what the crux of this matter is, in your opinion and I agree with you, is that there is a manipulation going on to get prices high in certain areas of the country, but we don’t know who is doing that. But who does it benefit?

COURT: Well, it benefits the refiners. In fact, the Federal Trade Commission found recently in the Midwest that as inventories were pulling low in the Midwest last summer, the refiners — at least one refiner was purposely not refilling its inventories. So there’s also a way of letting inventories run down to nothing and not refilling it. But it’s clearly the refiners, and what’s happening…

O’REILLY: Now, when you say refiners…

COURT: … is the refiners (UNINTELLIGIBLE) record profits.

O’REILLY: The refineries are owned by ExxonMobil, by Shell, things like that. Right?

COURT: Yes. About a half-dozen oil companies, and you’ve heard all the national brands. And these…

O’REILLY: Own the refineries, and that’s why they have record profits. Now…

COURT: They own the refineries. Many of them mine the crude. They have a very interesting vertical hold on the industry.

O’REILLY: You say there are no authorities in the federal government investigating this. Do you know that for a fact?

COURT: Well, they’re investigating for classic collusion, which is the smoke-filled room where the executives meet and determine that they’re going to fix price. What they’re not looking at is supply manipulation and the way that shipments are directed out of an area. And what we need to do, really, as a nation is start to lock at supplies and exports, and in fact, if you were to try to look at a market like silver or gold and have someone manipulate supply in the way that it’s being done with gasoline today, you’d have in a commodities market a classic manipulation of the market and maybe some people going to jail.

But because gasoline isn’t a classic commodities market — and I think it should be — you don’t have the same type of regulation.

O’REILLY: Yeah, you don’t have the federal oversight that you do. That’s an interesting point.

Now, when I drive home from Manhattan to Long Island, I pass through about seven towns. The gasoline prices are all the same. I pass maybe 20 different stations, competing stations. They’re all the same. How can that happen?

COURT: Well, it’s because a handful of oil companies control the industry, and they control it from many of the crude fields to the refineries to the pump.

O’REILLY: But do they call the individual stations and say charge them 2 bucks a gallon or 2.10?

COURT: Well, they have — they have contracts with the individual stations, and in many cases those contracts do allow them to control the price of gas at the pump or the range of the price of gas.

O’REILLY: Oh, I see. They can actually tell them how much to charge for the oil that they deliver.

COURT: And in the case of companies that aren’t on those types of contracts, there’s actually a way for the companies to manipulate what’s called the spot market, which is where those stations buy that product. And by — when you have six companies basically controlling the supply in the United States, they follow each other very closely, and it’s much easier for them to make profits by limiting supply than it is for them to compete against each other, because together they can allow for price spikes. And when you see prices spiking up between $2 and $3 a gallon, that’s happening largely because these companies are following one another in their practices.

O’REILLY: OK. Well, I want to talk to you about ethanol, but we don’t have time. We’ll bring you back to do that. Do you like ethanol? Just a yes or no. Is that a good solution to some of this?

COURT: Well, I think it’s one of the biggest boondoggles in the United States.

O’REILLY: All right. So you’re not with — with the ethanol deal here that the Bush administration is trying to push on California. All right.

COURT: I think it’s going to drive our price way up.

O’REILLY: All right, Mr. Court, we’ll have you back on that. And we thank you very much. And next we’ll wrap things up with “The Most Ridiculous Item of the Day” and some of your mail.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases