Fox News Network – THE O’REILLY FACTOR
O’REILLY: In the “Impact” segment tonight, ExxonMobil profits are in for the first quarter, up 45 percent from last year to a record $5-plus billion for one quarter. Meantime, high gas prices are hurting all working Americans. So what’s going on?
With us now in the studio is Tina Vital, a gas and oil analyst for Standard & Poor’s, and from Los Angeles, Jamie Court, the executive direction of the Foundation for Taxpayer and Consumer Rights.
Mr. Court, what do you think’s going on here?
JAMIE COURT, FOUNDATION FOR TAXPAYER & CONSUMER RIGHTS: Well, I think this is just naked, brute, market power. We have in America five oil companies, gas companies controlling more than half the refining capacity and 61 percent of the retail market, and what they’re able to do is artificially manipulate supply.
In California where we’ve had the highest gas prices in the nation, we have six refiners controlling over 90 percent of the supply and owning half the retail gas stations. The problem is we have the — with consolidation in this industry the ability of these companies to artificially keep inventories low, and what that…
O’REILLY: How do they do that?
COURT: … and what that — well, what they do is — as happened recently in the Midwest, is they don’t refill inventories as they’re heading into a summer peak season or, as a study that we did this last fall showed, they actually — in the Midwest, when prices went up over $2 a gallon last spring and summer, they were actually — these companies — exporting fuel out of the region to other regions to drain their inventories, and their market power allows them to do this…
O’REILLY: All right.
COURT: … and, unfortunately, what they do doesn’t rise to the legal level of collusion, according to the FTC, but, nonetheless, it’s a manipulation of supply.
O’REILLY: Well, if they’re manipulating, they’re manipulating.
Are they, Ms. Vital? Do you believe that?
TINA VITAL, S&P OIL & GAS INDUSTRY ANALYST: Well, I think it’s natural for a consumer to at first assume that something funny is going on, since the prices at the pump are going up. Oil prices are quite high. However, this is reflective of supply and demand dynamics.
O’REILLY: No, but Mr. Court is saying that these are being artificially manipulated, that supplies are being held back from the refineries and that even when they’re in a certain area that they’re being exported out to other countries so there isn’t enough so it drives the price up. Do you believe that?
VITAL: I believe that it’s supply and demand dynamics that are driving the prices up. There are low inventories in the United States on refined products, but, worldwide, we’re in a situation — we’re at low inventories.
O’REILLY: You’re not answering my question, though. You’re not answering my question. Are the companies doing it on purpose? Are they keeping the inventory low on purpose to drive the price up?
VITAL: The…
O’REILLY: Yes or no.
VITAL: The…
O’REILLY: Yes or no.
VITAL: They are constrained.
O’REILLY: OK.
VITAL: They are constrained because companies…
O’REILLY: Because they want high prices.
VITAL: No. Because if you look at the price of gasoline, the majority of that price, over half of the price of gasoline goes to the price of crude oil itself, and up to 30 percent…
O’REILLY: All right. Mr. Court, are you buying that?
VITAL: Another 30 percent go to federal taxes…
O’REILLY: No, I understand that. We all know that, but the…
VITAL: .,.. and to state taxes and the…
O’REILLY: Look, here’s the bottom line.
COURT: Well, this is…
VITAL: Refining is a tough business. Let me tell you this. It’s a tough business. You need size, and you need technology, or…
O’REILLY: Well, they have all that. Exxon Mobil and the other five companies have all that. But what Mr. Court is saying — and I believe him, and you haven’t convinced that — that he’s wrong — is that these companies are holding back supply, taking supply away from Americans, sending it overseas in order to drive up this price as high as humanly possible and make $5 billion a quarter. Am I wrong, Mr. Court?
COURT: No. The proof’s in the pudding. The reason that the top five gasoline companies’ profits went up in the first three months of this year 40 percent over what it was last year, according to Public Citizen, is because every time a price spikes, it’s not related to the actual cost of production. It’s related to this artificial manipulation of supply, which sends up a speculative price spike very quickly. But you don’t see lines at the pump. You don’t see people waiting in line.
O’REILLY: Yeah, there’s enough oil to buy.
COURT: It’s all a paper shortage.
O’REILLY: But we’re at fault, too, are we not — I’m going to let Ms. Vital just have the last word — because we are using so much more oil because of our cars, our gas guzzlers, and things like that. I’ll let you have the last word here.
VITAL: Well, oil companies are profiting. The majority of their profits come from exploration and production, not from the refining and marketing side. Refining and marketing is a very tough business. A — tight refining margins have caused changes within the industry in the last several year. We’ve seen consolidations, and now…
O’REILLY: All right.
VITAL: … we’ve seen low inventories.
O’REILLY: You’re losing me a little bit, but I still think that these guys are doing it on purpose. There’s nobody watching them, and they’re making the money, and everybody else is getting hurt.
VITAL: We have a lot of different blends of gasoline, and it costs money to…
O’REILLY: All right. I think somebody should be helping out the American worker. Ms. Vital, Mr. Court, thank you.
Plenty more ahead as THE FACTOR moves along this evening. Six armed kids holding off authorities in Idaho. We’ll take you there for the latest when we come back.
