Oil profiteers employing slick tactics

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The Denver Post

Colorado’s mountain towns are packed with tourists this weekend, their bikes mounted on top of cars, fishing gear tucked in the trunk.

The annual holiday commune with nature before the aspen turn and snow closes the campgrounds is a proud tradition.

Just try not to think about the cost.

This year, regular unleaded set you back $2.65 a gallon if you filled up the RV in Aurora on Thursday or close to $4 a gallon if you found yourself running on fumes Saturday in Aspen.

But as we raid the kids’ college fund to pay for one last summer weekend in the woods, let’s pause for a moment to consider the oil industry shareholders.

They’ve never had it so good.

In fact, while we’re stirring the oatmeal over the Coleman, they’re shopping for investment property in Tuscany or maybe taking the private jet to Santa Barbara for a few days on the beach.

It’s true that Hurricane Katrina loused up oil production in the Gulf of Mexico, creating the potential for reduced supplies this fall. But if you think that’s why you’re paying 70 percent more for gasoline this year over last, you’ve been sniffing too much crude.

Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, said the explanation for the high prices is right there in the oil companies’ quarterly reports.

It’s the result of “huge profiteering,” he said.

Exxon Mobil, the world’s largest publicly traded oil company, showed a 218 percent increase in profits in 2004, back when gas prices were still below $2 a gallon across most of the country.

Then it hit the jackpot. Prices kept rising. First-quarter profits in 2005 rose 44 percent, then jumped 32 percent in the second quarter.

It was no accident. “They kept inventories in this country very low,” Court said.

A study released last week by the foundation followed the money from the 65-cent-per-gallon gasoline price hikes in California between Jan. 17 and April 18, 2005. It found that profits to refiners increased by 61 cents per gallon; the other 4 cents went to the state in increased revenue from California’s 7.25 percent sales tax on gasoline.

The quarterly reports show that this flood of money into the oil industry was not spent on more exploration, more refineries, efficiencies in delivery or even meeting environmental regulations, which have been emasculated as supplies have tightened, Court said.

As demand in the U.S. and China grew, the oil industry simply manipulated production to keep supplies tight.

Back when Katrina was little more than a twinkle in a hurricane’s eye off the coast of Africa, Exxon Mobil and the other big oil companies moved to a “just in time” delivery system.

So, while they publicly bemoan the tragedy along the Gulf of Mexico, shareholders of big oil know they stand to benefit handsomely from it. Further shortages in supply can only increase profits more.

Thanks to Hurricane Katrina, their third-quarter reports will have champagne corks popping in boardrooms all over the world.

Since this is nothing more than the old law of supply and demand on display, we can expect that the price of oil will continue to rise as long as we continue to demand more and more energy. We’ll accelerate the transfer of wealth from the masses to oil company shareholders.

And the situation will only get worse.

The M. King Hubbert Center for Petroleum Supply Studies at the Colorado School of Mines predicts oil supplies worldwide will peak in 2010, and decline dramatically after that. Prices should hit Beluga caviar levels long about 2050.

Maybe that finally will be the incentive Americans have been waiting for to join the rest of the world in switching to fuel-efficient vehicles and houses, and investing in alternative energy sources.

So enjoy the weekend drive to the mountains while you can.

By next Labor Day, we could be looking back fondly on 2005, when gasoline was only $3 a gallon.
Diane Carman’s column appears Sunday, Tuesday and Thursday. She can be reached at 303-820-1489 or [email protected]

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