Government Must Speed Market Regulation, Says Consumer Watchdog; Group Calls for Stiffer Oil Trading Rules and Oversight of Refineries
Santa Monica, CA — The national average price for gasoline rose another four cents this week to $3.97 a gallon for regular, even as oil prices stayed at about $8 a barrel below the top prices hit last month. A continued spike in the price of gasoline and diesel ($4.707 a gallon) is a spiraling burden on working and middle-class Americans, said Consumer Watchdog.
“If oil drops by $8, which comes to 19 cents a gallon, consumers deserve to see results at the corner gas station,” said Judy Dugan, research director of Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer Rights). “Drivers are stretched to the limit and can’t wait for refineries to refill their coffers. For truck drivers that goes double, with diesel priced at more than 70 cents a gallon above gasoline.”
Much of the price difference between gasoline and diesel is already pure refinery profit, noted Consumer Watchdog.
Government is waking up to the urgency of energy market oversight, with an investigation in progress and regulation in the wings, but it won’t help consumers or the economy if oil companies just shift their profit focus to gasoline, said Consumer Watchdog. The group urged Congress and the White House to agree on new oversight of refining operations as well. Its recommendations include requirements for:
– Transparent reporting of refinery costs and profit.
– Increased gasoline supply on hand to dampen price spikes. Historically, gasoline refiners and marketers held about a 30-day national supply of gasoline, but in recent years the supply has averaged 22 days, making prices more vulnerable to any shift in refinery output, either deliberate or accidental.
As for oil trading, an urgent Congressional measure to close what’s called the “Enron Loophole” and add regulation to currently unregulated oil trading markets is still stuck in the farm bill. The huge omnibus bill was returned to Congress to fix an error in the version that president Bush vetoed last month. Now the repaired bill has to be passed by the House and Senate again, Bush has vowed to veto it again, and then the House and Senate must override the veto.
“President Bush should skip the drama and delay of another useless veto and sign the bill,” said Dugan. “By now we all know he doesn’t like the farm bill, and getting market regulations into effect is far more important than another fit of presidential pique.”
The White House has even opposed cuts to the oil industry’s taxpayer subsidies, as proposed by Congress, to back renewable energy research and development.
“The major oil companies, hauling in one record profit after another, have absolutely no need for incentives that come from taxpayers’ pockets,” said Dugan.
Gasoline consumption continues to decline nationally, according federal energy data, and is falling even more sharply on a per capita basis, noted Consumer Watchdog. There is no actual shortage of supply. European demand is also down, and the forecasts of demand in China and India have been scaled back this year by the International Energy Agency, all without any effect on the price of oil.
Consumer Watchdog has called for:
– Sales of oil from the federal Strategic Petroleum Reserve. Under stiff pressure from Congress, President Bush has stopped adding to the reserve, which is at a record level above 700 million gallons total. Releasing some of the that oil, along with a presidential show of determination, would add to downward pressure on oil prices.
– Closing the Enron Loophole in commodity trading regulation. A regulatory measure in the federal farm bill (S.2058 by Sens. Dianne Feinstein and Carl Levin) would help stop speculative oil pricing. (See more on Enron Loophole and farm bill amendment here.)
– Increase the amount of margin funds that traders must put up in energy markets to help suppress speculation. Currently, speculative traders who never see, sell or buy a barrel of oil are able to control hundreds of thousands of barrels for only 5% to 7% of the actual price.
– Senate approval of an alternative fuels bill to be funded by withdrawing $1.8 billion a year in unjustified taxpayer subsidies to oil companies. This measure, passed by the House, has not been taken up in the Senate, where opponents are using a filibuster tactic to require 60 votes for passage. A similar House measure was removed from the federal energy bill by the Senate last year under pressure from the oil lobby. (Find text of HR 5351 here.)
– Oversight of refinery operations, including regulation of national gasoline supplies. In the last decade, the average on-hand supply of gasoline has dropped from 30 days’ worth to about 22 days. This makes prices increasingly sensitive to any cuts in production. Only government oversight of refineries and regulation to control the supply of gasoline, nationally and regionally, will keep supplies adequate to control prices.
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