BP’s Alaska Shutdown Follows Maintenance Cutbacks as Profits Boomed; Consumers Pay the Price

Santa Monica, CA — BP oil’s “indefinite” shutdown Monday of its Alaska wells and pipeline feeders will generate a nationwide price spike, but the West Coast will feel the brunt of shortages, said the nonprofit, nonpartisan Foundation for Taxpayer and Consumer Rights. Alaska supplies 20% of California’s crude oil supplies and the proportion is higher in the Pacific Northwest, whose gasoline market affects prices and supply in the whole U.S. West.

“Drivers will pay through the nose for this very preventable emergency, while oil companies will boost their already record profits even further,” said FTCR Research Director Judy Dugan. “Every increase in the price of crude oil is translated immediately into more gravy for the oil companies because they don’t just pass through the price of crude oil, they tack on indefensible profits for the oil itself and again at the refinery.” The peak price this spring was $3.08 nationally for a gallon of regular and $3.39 in California with no emergency at all, noted FTCR, so $4.00 or more a gallon for regular would be no surprise after the BP debacle.

The BP shutdown shows U.S. dependence on the oil companies, which make more profit each time the price of crude oil goes up, said FTCR, and it is firm evidence of the need for robust alternative energy development. California is leading the way nationally with Proposition 87, the Clean Energy Initiative, on its November ballot. “Oil companies desperate to keep their monopoly on transportation fuels are pouring millions into defeating Proposition 87,” said Dugan. “The best revenge for motorists about to slapped even harder at the pump will be passage of 87, which will help free them from the yoke of the oil companies who are picking their pockets.’ See www.yeson87.org for more.

President Bush‘s opening of the national strategic oil reserve will have little immediate impact on the crisis. It would offer a quick supply boost only in the Gulf Coast, and it could take a month or more to ship from that reserve to the West Coast, said FTCR. “The restriction of gasoline reserves by California refiners is about to come home to roost,” said Dugan. “Refiners have kept supplies down to a few weeks’ supply in order to keep prices up, even knowing that it would take weeks to ship in new supplies in an emergency, for which BP‘s shutdown extravagantly qualifies.”

A May 23 study of these skimpy reserves by independent oil analyst Tim Hamilton for FTCR predicted that a severe problem at a single refinery that shut production for even a few weeks could boost pump prices to $4.00 and above. “The loss of 400,000 barrels a day of crude oil from Alaska is well beyond anything envisioned in that study, and the consequences are likely to be severe,” said Hamilton. Click here to read the study.

BP and the other major oil companies have spent tens of billions of dollars of their record profits buying back their own stock to boost the price instead of pouring it into exploration, alternative energy and, most to the point today, maintenance. In 2004, as the new wave of record profits began and the corrosion that shut BP pipelines was eating away their metal, BP cut back its already overloaded Alaska pipeline inspectors. A major BP pipeline spill less than four months ago poured up to 267,000 gallons of crude in and around Prudhoe Bay. Marc Kovac, an official of the union that represents pipeline workers said then to the New York Times, “For years we’ve been warning the company about cutting back on maintenance. We know that this could have been prevented.”

FTCR called on federal and state governments to use every tool available to prevent further oil company gouging of consumers on the back of this disaster. Oil company lobbying and campaign contributions have weakened and now stalled California legislation that would extend liability for price gouging to the refiners themselves and expand the circumstances for opening an investigation. “If this doesn’t jar loose state leaders whose campaigns are bound to oil money, nothing will,” said Dugan. Click here for FTCR’s news release on the original gouging legislation.

Proposition 89, also on California’s November ballot, would cut the money ties between legislators and oil company lobbyists. The measure would offer public funding of candidates along with stricter contribution limits for large special interests. “This will free candidates and elected officials from the strings of obligation that come with big oil’s money, freeing legislators to act for the benefit of all Californians,” said Dugan. Click here for more from the San Francisco Chronicle on Big Oil’s control over the state Legislature.
See also www.cleanmoneyelections.org.

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