Oil Production and Gasoline Refining Cuts Increase Odds of Future Price Spikes, Says Watchdog
 
Santa Monica, CA — Shell’s 4th quarter loss of $2.8 billion, based on the lower value of its oil inventory, turns into a $4.8 billion quarterly profit and a $31.4 billon record yearly profit if those paper losses are excluded, said Consumer Watchdog. Shell, the 2nd-largest integrated oil company, also ended the year with a $15.2 billion cash hoard, up 68% from a year ago, even as it cut oil and gasoline production.
 
“These real dollars, as opposed to the Shell’s paper losses, stay in the pockets of the company and its shareholders, after being plucked from consumers when U.S. gasoline was over $4 at the pump and crude oil prices hit $145 a barrel, said Judy Dugan, research director of the nonprofit, nonpartisan Consumer Watchdog.
 
Shell and other major oil companies have also sharply cut refinery output and are likely to cut further in 2009, in an attempt to raise fuel prices and refinery profits.
 
In California, Shell is being investigated by state Attorney General Jerry Brown for possible antitrust violations in its withholding of oil supplies from a refinery that was in Chapter 11 bankruptcy. If the Bakersfield refinery shuts permanently, Shell would profit directly, said Consumer Watchdog. The loss the medium-sized refinery owned by Flying J would free up more of Shell’s own oil production for Shell refineries, while also cutting gasoline supplies in California and raising fuel prices. (Click here to read the Los Angeles Times story.)
 
“The global economy was pushed toward the recessionary cliff by the energy price spike in the middle of 2008, and the roller-coaster price cycle will repeat unless regulators act,” said Dugan. “Both speculative markets and refinery production need more vigorous oversight to protect both consumers and the economy.”
 
Consumer Watchdog backs regulatory changes including:
 
– Greater oversight and regulation of all energy trading markets, as well as trading limits, complete reporting of trades and higher trading costs for speculative traders who are not selling or buying physical petroleum products.
 
– Transparent reporting of refinery operating costs separate from profits, and requirements that the industry keep on hand an adequate supply of gasoline to prevent sharp price spikes.
 
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For more information, see:
www.ConsumerWatchdog.org
www.OilWatchdog.org