Withholding Contributions to U.S. Oil Reserve Does Nothing to Stop Oil Company Profiteering
Santa Monica, CA — President Bush‘s decision to delay filling the federal Strategic Petroleum Reserve will not lower gas prices and does not address the underlying problem creating the gas price crisis, said consumer advocates with the Foundation for Taxpayer and Consumer Rights (FTCR), a nonprofit, nonpartisan organization.
What’s driving up prices at the pump to unsupportable levels is not a shortage of crude oil but oil company profiteering and gasoline supply manipulation by the oil refiners, the group said. To fix both problems, President Bush, a former oilman, should instead be focusing on oil companies’ production and pricing. Congress should push ahead with plans to expand federal and state prosecutors authority to punish price gouging as well as recoup windfall profits.
“Bush’s action is at the wrong end of the problem, comparable to pushing a rope uphill,” said Judy Dugan, research director of FTCR. “Last week, for instance, refineries in California were dramatically raising their production of gas to be sent to other states, while reducing production of the formula used inside California by more than 10%. This smacks of market manipulation, not shortages of crude oil.”
Click here to read that news release.
Independent analysts believe refineries in the western U.S. are not running at capacity, and Sen. Charles Schumer of New York has called for an FTC investigation of alleged underproduction at some refineries. In the past several years, oil refiners have consistently refused to increase capacity — even by modernizing and expanding the refineries they already have — to build the cushion that would prevent refinery-caused shortages.
U.S. Energy Secretary Samuel Bodman acknowledged to the Associated Press Tuesday that the Bush’s action would “probably not” make a significant difference in the price of gasoline.
“Refiners have no incentive to add capacity as long as they are able to charge whatever the market will bear, no matter what pain it causes motorists,” said Dugan of FTCR. “It’s good to see Bush seriously acknowledging a problem, but he needs to offer a real solution to get prices down.”
A previous study commissioned by FTCR and conducted by independent oil company analyst Tim Hamilton concluded that, of the 48-cent a gallon price runup in California between Jan. 1 and April 10, only 16 cents was attributable to the rising price of crude oil and accompanying gas tax increases. Additionally, the costs of ethanol, reformulated gasoline and other production expenses had already been built into previous prices at the pump, and states without ethanol have seen similar gasoline price spikes. The majority of the pump increase is profit.
“Three dollar gasoline is lining the pockets of investors and company executives, while working people who have no choice but to drive are suffering for those excesses,” said Dugan. “For the oil companies, too much seems never to be enough.”
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