Pain at the Pump

In May the price of gas hit record levels in the United States. Many people might be relieved to know that Congress is passing legislation in an attempt to address part of the problem. The House passed a bill on Wednesday, May 23, "that would make gasoline price gouging a federal offense." Unfortunately, the White House is threatening to veto it. Tyson Slocum, the Director of Public Citizen's Energy Program, testified to Congress on May 22nd about gas prices and oil company profits. Here is some rather infuriating information that Mr. Slocum provided to congress:


Gasoline prices have nearly tripled in the last five years, creating financial hardship for millions of families, as the average annual expenditure on gasoline increased $1,000 for the typical family over that time....While American families pay record high prices, oil companies are enjoying the strongest profits in the economy. Since 2001, the largest six oil companies operating in the United States--ExxonMobil, Chevron Texaco, ConocoPhillips, BP, Shell and Valero--recorded $477 billion in profits....To add insult to injury, oil companies enjoy billions of dollars worth of subsidies courtesy of the U.S. taxpayer at a time when the industry records record profits....[oil companies'] largest capital expenditure in 2006 was to buy back stock and pay dividends to shareholders....In just the last few years, mergers between giant oil companies...have resulted in just a few companies controlling a significant amount of America's gasoline, squelching competition....and five oil companies are reaping the largest profits in history....The consolidation of downstream assets--particularly refineries--plays a big role in determining the price of a gallon of gas....A recent government study revealed that the 'source of potential market power in the wholesale gasoline market is at the refining level becuase the refinery market is imperfectly competitive and refiners essentially control gasoline sales at the wholesale level' and concluded that 'mergers and increased market concentration generally led to higher wholesale gasoline prices'....The industry leader, ExxonMobil, spent $37.2 billion buying back its stock and paying dividends to its shareholders in 2006, while spending only $19.9 billion on its oil exploration and refining capital investment....While major oil companies haven't applied for a permit to build a new refinery, a small start-up has: Arizona Clean Fuels....if a small company can do it, why can't ExxonMobil, the world's most profitable corporation, do it?


As if this is not infuriating enough, "The Foundation for Taxpayer and Consumer Rights exposed internal oil company memos that showed how the industry intentionally reduced domestic refining capacity to drive up profits."


The bill passed by the House "directs the Federal Trade Commission and Justice Department to go after oil companies, traders or retail operators if they take “unfair advantage” or charge “unconscionably excessive” prices for gasoline and other fuels" and "would for the first time create a federal law making energy price gouging illegal." Based on testimony provided to congress and the memos mentioned above, this is pretty much what the oil companies are doing.


Bush's response: "The White House called the measure a form of price controls that could result in fuel shortages. It said President Bush would be urged to veto the legislation should it pass Congress."


The only people controlling prices are the oil companies, the energy traders and their enablers--the people in Bush Administration and those in Congress who didn't support the recent bill passed by the House.


Not surprising since Republicans have a cozy relationship with big oil:


Since 2001, energy corporations have showered federal politicians with $115 million in campaign contributions—with three-quarters of that amount going to Republicans....[the energy bill passed by the Republican controlled congress and signed by Bush in August of 2005] lavishes these lucrative corporations with billions of dollars of taxpayer subsidies, while doing little to curb energy demand.


Fortunately, when the Democrats took over congress in 2006 they passed legislation to eliminate some of those subsidies.