Government’s ‘Business as Usual’ Stance Is Inexcusable as Pump Price Soars, Says Consumer Group
Santa Monica, CA — The first-quarter record profits reported today by oil giants BP and Shell came almost entirely on crude oil profits driven by speculative trading, said Consumer Watchdog. Spiraling gasoline and diesel prices have crimped the U.S. economy and pushed consumers deeper into credit card debt, yet the White House and Congress have failed to take even small steps to ease the pain.
“No driver who is pumping $80 worth of regular into the minivan each week will be surprised by the continuing run of profit records.” said Judy Dugan, research director of Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer Rights). “Consumers are driving less, but for every trip they cancel, rising prices at the pump more than wipe out their savings. They pay a second time as inflation at the grocery store is driven by fuel surcharges on every truck delivery.”
The nonprofit, nonpartisan Consumer Watchdog has called for action to quell market speculation and cut back taxpayer subsidies to oil companies (see below), but the most obvious immediate action is for the White House to stop buying market-priced oil for the federal Strategic Petroleum Reserve, which is at record high levels above 700 million barrels, and start selling a fraction of the reserve back into the market.
“Purchases for the reserve, at these record oil prices, come straight from the pockets of taxpayers, and by taking oil off the market they fuel continued speculation,” said Dugan. “Yet President Bush has turned a deaf ear on pleas by Congress and consumer advocates to take the small, painless and beneficial step of curbing this excess. There is no strategic benefit more important than using the oil reserve to aid consumers and offset energy inflation.” (Click here to see Consumer Watchdog’s letter to President Bush.)
At his news conference today Bush refused to stop adding oil to the strategic reserve.
Shell’s $7.8 billion 1st quarter profit, 12 percent increase, was a record, above what analysts had expected — and was less than $2 billion below the company’s entire yearly profit of $9.65 billion in 2002. BP’s $6.6 billion, 48 percent leap, was also a 1st quarter record. (Click here to see more historical data at Consumer Watchdog’s “Oil Profits Monster” database. Quarterly data and charts for Shell and BP will be updated by noon PDT.)
The companies’ refining profits did not match the increases from oil sales, but that was in part because the oil giants are selling their own petroleum at inflated prices to their own refineries, said Consumer Watchdog. The current upward spike in pump prices is unlikely to stop even if oil prices abate, because refiners are now working to boost profits on their end of the business.
“When one uses the spreadsheet to compare the price at the pump with the quarterly company profit reports, it is clear the companies have inflated bottom lines by raising pump prices far in excess of any actual increased cost incurring from the highly publicized increase in the commodity price of crude, said Tim Hamilton, independent oil analyst. “Since much of the current spike at the pump occurred in March, next quarter profit reports can be expected to set yet another new record.”
Consumer Watchdog has called for:
– Action by President Bush to stop adding to federal Strategic Petroleum Reserve and sell from the reserve to stabilize and drive down oil futures price. Click here for to see CW letter to White House.
– Closure of 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 regulate trading markets to help stop speculative oil pricing. (Click here to see more on Enron Loophole and farm bill amendment.) Regulators should also increase the amount of margin funds that traders must put up in energy markets to help suppress speculation.
– Senate approval of an alternative fuels bill (HR 5351) 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 block passage. A similar House measure was removed from the federal energy bill by the Senate last year under pressure from the oil lobby.
– 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 gasoline production.
Consumer Watchdog (formerly The Foundation for Taxpayer and Consumer Rights) is a leading nonprofit, nonpartisan consumer advocacy organization.
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