Caruso questions refining capacity manipulation allegations

Nick Snow
Washington Correspondent

WASHINGTON, DC, June 15 -- The US government's top energy economist questioned allegations that refiners intentionally reduced oil-processing capacity this year to drive product prices higher.

US Energy Information Administration Administrator Guy F. Caruso told the Senate Small Business and Entrepreneurship Committee June 14 that reduced product inventories which extended into May apparently were the result of unplanned refinery unit shutdowns.

During a hearing on the impact of higher gasoline prices on small businesses, Caruso explained that refiners schedule maintenance turnarounds in January and February to repair equipment and prepare for the summer driving season.

"The companies try to plan this to maximize their individual sales opportunities. No individual company would take down a refinery to reduce sales. Their objectives are to maximize sales. What went wrong was that there were a number of unplanned outages," Caruso said. "While we're not an investigative agency, we haven't seen any attempt to manipulate the marketplace."

Citing EIA's latest short-term energy outlook released on June 12, he said US regular gasoline prices are expected to average $3.05/gal nationwide this summer because of strong demand and low inventories. Crude oil prices, which EIA expects to average over $65/bbl for West Texas Intermediate through the summer, are expected to keep the average nationwide regular gasoline price above $3/gal through the summer, Caruso said.

"Recently, total gasoline imports have returned to normal levels. We believe these normal levels or possibly somewhat higher-than-normal levels will need to continue to avoid further upward pressure on prices," he told the committee. "With the hurricane season beginning, continued tight refining conditions and low gasoline inventories, and increased demand for summer travel, upward pressure on gasoline prices does remain a concern."

Business impacts
"Whatever the cause, the volatile and increasing cost of gasoline is wreaking havoc on small businesses," said another witness, Sal Lupoli, president and chief executive of Sal's Pizza in Lawrence, Mass. "Rising fuel costs have a direct impact on my means of delivery for my business, and on my employees who often can't afford gasoline for their cars so they can come to work. We encourage car-pooling and public transportation, but these options are not always available."

Janet Myhre, government services group director at Chuckals Inc., said the office supplies company in Tacoma, Wash., is feeling the impact of higher crude oil prices beyond its delivery fleet. Prices have risen for reporter binders because vinyl used on their covers is made from petroleum, she explained. "We're at a level where we have to decide whether to scale back our operations. Maybe we'll lay off some local employees and start to use an outside delivery service," she said.

Other witnesses described impacts of higher gasoline prices on larger operations. Frederick W. Smith, chairman, president, and chief executive of FedEx Corp. in Memphis, said the overnight delivery service decided it would use EIA's reported oil price to help determine its rates, which it posts on the Internet, instead of being in the oil futures market.

"As oil prices go up, we add surcharges. At times during this recent run-up, our prices have gone as much as 20% higher for our air express business, and slightly less for our ground business. Over the last 3 years, we have steadily increased the base crude oil price," he said.

Smith also cochairs the Energy Security Leadership Council, which has urged Congress to require the US transportation fleet to use fuel more efficiently, make alternative fuel sources more readily available, and increase access to unrecovered domestic oil and gas resources for responsible production.

Timothy P. Lynch, senior vice-president of American Trucking Associations Inc., said the organization's members are concerned about rising diesel fuel prices. ATA and its members do not oppose new engine designs and requirements to use ultralow-sulfur diesel, but they want Congress to understand that environmental improvements sometimes reduce fuel efficiency, he told the committee.

"Many of the problems anticipated [with ULSD] have not materialized. We support [biodiesel's] use but believe that national standards are needed, with pre-emption of state mandates, so it will be a uniformly high-quality fuel," Lynch said.

Contact Nick Snow at nsnow@cox.net.

Related Articles

EOG sees crude potential in Leonard, Second Bone Spring

12/12/2014 EOG Resources considers various formations within the Delaware basin of West Texas and New Mexico to be one of its three top US plays with the othe...

Linn sells down Permian position

12/12/2014 Linn Energy LLC, of Houston, has agreed to sell assets in Ector and Midland counties, Tex., to Fleur de Lis Energy LLC, of Dallas, for $350 million.

Frac ban exemption made in Broomfield

12/12/2014 A Colorado District Court judge has ruled that a hydraulic fracturing ban in Broomfield, Colo., does not apply to an operator that entered into an ...

Eagle Ford sweet spots still profitable

12/12/2014 The average Eagle Ford well remains viable with US light, sweet crude prices at $80/bbl, but the economics of some wells outside the play's sweet s...

EnCana, Talisman optimist on Montney, Duvernay

12/12/2014 EnCana Corp. has achieved significant cost savings in the Montney and Duvernay plays, executives told analysts while discussing EnCana's third-quar...

Bakken producers face possible new vapor pressure standards

12/12/2014 Oil producers in the Bakken, Three Forks, and Sanish plays could face new transportation safety regulations from the North Dakota Industrial Commis...

Common interests lead to Gtuit, Corval partnership

12/12/2014

Gtuit was started 3 years ago by three engineers in Billings, Mont, who developed a mobile, remote NGL capture and gas conditioning system.

Bakken flaring plan for Hess includes remote NGL capture

12/12/2014 Hess Corp., taking seriously a state mandate to reduce flaring in the Bakken shale, has adopted the use of a remote NGL capture technology at a han...

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected