U.S. Oil Industry
Made $100 billion
in Windfall Profits; Eliminating Refineries
Paved Way for Gas Price Hikes
The latest consumer group study on skyrocketing gas prices shows the
U.S. oil industry made $100 billion in windfall profits since the
late 1990s, largely by eliminating refining capacity that paved the
way to drive up prices at the pump.
Those price increases have added more than $1,000 a year to the average
family's gasoline bill.
The analysis, titled "Debunking Oil Company Myths and Deception:
The $100 Billion Consumer Rip-Off," found that the difference
between the cost of crude oil, and the price at the pump (net of taxes)
is now about 40 cents a gallon higher than historical averages. That
spike comes as a small number of large oil companies control both
oil production and refining in the United States.
"Consumers are trapped between a small group of powerful, non-
competing oil companies out to maximize profits and weak governmental
authorities who consistently fail to strengthen or enforce the law,"
said Mark Cooper, director of research for Consumer Federation of
America, and author of the report.
"Comparing their annual reports to their PR campaigns we found
that the industry tries to mislead the public and policymakers by
telling very different stories on Wall Street and Main Street,"
Cooper added. "On Wall Street they point to their soaring return
on equity and cash flow as proof of their huge profitability, while
on Main Street they point to profit as a percentage of sales and ignore
cash flow to claim less than stellar results."
Ann Wright, senior policy analyst of Consumers Union, applauded the
report. "The oil industry's anti-competitive practices and mismanagement
are gouging consumers and filling industry coffers," Wright said.
"It's time for Congress and the Administration to plow excess
profits into expanded refining capacity that will grow competition
and thereby hold down gasoline prices in the future."
CFA and Consumers Union are recommending Congress and the Administration
take immediate steps to alleviate future spikes in gas prices.
"We need policies that change the market fundamentals and we
cannot rely on the oil companies to do the job -- their record of
underinvestment, mismanagement and deception teach us otherwise,"
Cooper said.
The recommendations include:
-- Reinvest windfall profits in expanded refinery capacity.
-- Reduce fuel consumption through aggressive, targeted improvements
in vehicle fuel efficiency standards.
-- Establish a federal reserve of gasoline stock to use during seasonal
peaks or in the event of a supply disruption.
-- Create a joint task force of federal and state Attorneys General
to monitor the structure, conduct and performance of gasoline markets.
