When it comes to understanding the volatile pricing of gasoline, who can Oklahomans trust? Some people say the free market.
Gas prices keep climbing even as oil prices drop
Oil prices fell back Thursday ahead of a report expected to show U.S. inventories of crude and petroleum products grew last week.
So even if U.S. crude supply exceeds demand, prices still rise? There must be something else choking the supply system. Surely, we should be able to trust the insight of our elected representatives.
Republican lawmakers, including Sen. Jim Inhofe, R-Tulsa, and Rep. Mary Fallin, R-Oklahoma City, called for comprehensive energy legislation that would open more public lands for oil and gas drilling and make it easier for new refineries to be built.
Ah yes, those whacky environmentalists preventing oil companies from building new refineries. I wouldn’t be surprised if the U.S. still has the same number of refineries today as we had 25 years ago.
Over the last quarter-century, the number of refineries in the United States dropped to 149, less than half the number in 1981.
Oh, well all those refineries closing is probably from pressure by liberal lawmakers.
2004 – SAN DIEGO — State Assembly member, Christine Kehoe from San Diego, is trying to force Shell Oil to keep a California refinery open in order to help push gas prices down.
Oh, then it must be the EPA.
From 1975 to 2000, the U.S. Environmental Protection Agency (EPA) received only one permit request for a new refinery. And in March, EPA approved Arizona Clean Fuels’ application for an air permit for a proposed refinery in Arizona. In addition, oil companies are regularly applying for – and receiving – permits to modify and expand their existing refineries.
But then why would oil companies want to close refineries?
- 1981 – 329 refineries operating at 68.6% capacity
- 2006 – 149 refineries operating at 89.7%
Oh. Well, at least that makes good business sense. A refinery operating at 90% capacity should be much more profitable than running at 70%. So I guess we know where all the profits from high gasoline prices are going; to the stockholders of the nation’s biggest refinery companies.
Consider some of these price moves over the past year: Frontier Oil (symbol FTO) 28%. Valero Energy (VLO) 40%. Tesoro (TSO) 63%. Alon USA Energy (ALJ) 64%. Western Refining (WNR) 76%.
Now, here’s the punch line: All of these numbers represent losses, not gains.
Shoot! Well then, I guess it makes sense to keep refineries operating at even greater capacities.
In response to falling gasoline demand and rising costs, refiners have cut their production rates. Refining utilization rates, for example, slumped to a low of 81.4 percent in the second week of April, compared with 90.4 percent at the same time last year. Earlier this month, refineries were running at 85 percent of their capacity.
“They are not sitting in a boardroom and colluding, but they can see easily enough where their benefit lies, and it doesn’t lie in a price war,” said Judy Dugan, the research director at Consumer Watch. “In a truly competitive market, you might see some of these providers try to improve their market share by reducing prices. But this is not happening. They are all better off by restricting production to keep prices up.”
Mark Cooper, director of research at the Consumer Federation of America, said mergers in the 1990s had cut the number of refiners in the country and contributed to reduced competition in the refining market.
“We let them accumulate market power through the wave of mergers, and we’ve been paying the price in the last five years,” he said. “If there is a small number of players in the market, they learn from each other’s behavior.”
Hmmm… Either Sen. Inhofe and Rep. Fallin are catering to our nation’s oil cartel by blaming the problem on lack of supply and refining capacity, or they know something everybody else doesn’t.