Rest of Big Oil Will Show Same Pattern Of More Money From Making Less Gasoline, Says Group
Santa Monica, CA — British oil giant BP today reported a 29% increase in US refining profits for the 2nd quarter, even though its US refinery production dropped by 17%, said the Foundation for Taxpayer and Consumer Rights. BP‘s U.S. figures show the gold mine that oil companies have found in gasoline and other refined products at US consumers’ expense, said FTCR and its OilWatchdog.org project.
BP‘s benchmark overall profit figure of $6.1 billion for the quarter was down down 1.5% from last year, but refinery profits made up for a 12% drop in oil production profits.
The US refining figures, with a 2nd quarter profit of of $964 million, up from $749 million a year ago, show how much the soaring refining profits meant to BP, said FTCR. (Click here to see BP numbers on refining and marketing.)
“Oil companies including BP are making outrageous profits on gasoline even when they make less of it,” said Judy Dugan, research director of OilWatchdog and FTCR. “In a normal business — like the local supermarket — customers would walk out on sellers who cut supplies and raised prices. The oil and refinery business is operating in a profit-machine universe outside the laws of competition.”
See OilWatchdog’s new report, “The Katrina Syndrome,” on how oil companies’ decisions to restrict gasoline inventories, even at periods when they have excess refining capacity, have generated price spikes.
“The rest of the week’s profit reports are expected to underline the disconnect between last quarter’s flat oil prices and the record gasoline price spike that peaked in May,” said Dugan. “The difference, in all cases, was poured directly into refinery profit margins.”
BP, alone among oil companies, publishes its estimate of global industrywide refining profits. This “Global indicator refining margin” shows US margins, which are mostly profit, at $24.40 per barrel, up from $17.90 last year. In Europe and Asia, refining margins averaged only $6.50 per barrel, barely above last year’s $6.30 a barrel.
“This makes the U.S. consumer the cash cow of gasoline profits,” said Dugan. “It’s a clear call for government to investigate what’s going on in refinery costs and profits.”
Risk to Refinery Safety, Maintenance
BP‘s profits could be called weak only in relation to the rest of Big Oil, said FTCR, but investors are expected to push the company for more cost reductions. That would likely include BP‘s increases in maintenance spending after 15 deaths at a Texas refinery blast in 2005, and Alaskan oil spills and shutdowns last year. Both were blamed on maintenance and safety penny-pinching.
Such investor pressures are a key reason that government must step in to better oversee and regulate refineries, and expand oversight of pipelines, said FTCR.
“Refinery safety, maintenance, expansion and modernization funds should be the last things cut, not the first,” said Dugan. “Regulatory oversight would put oil companies on an equal footing for such spending, insulating them from the demands of speculative investment.”
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The Foundation for Taxpayer and Consumer Rights (FTCR) is California’s leading nonpartisan consumer advocacy organization. For more information, visit us on the web at: www.ConsumerWatchdog.org and www.OilWatchdog.org.