Consumers face high gasoline prices despite reduced consumption, ample supplies and increased ethanol production because speculators are driving crude oil prices higher and refiners plan to reduce runs, the Consumer Federation of America charged on Mar. 26.
A new report, "Rising Gasoline Prices: Why Can't Consumers Catch a Break," by Mark Cooper, CFA's research director, alleged that refiners are extending maintenance operations and cutting runs to pass higher crude costs through to consumers and maximize profits. If they succeed, and if oil prices stay around $100/bbl, retail prices could increase by as much as 75 cents/gal before Memorial Day, it said.
John C. Felmy, chief economist for the American Petroleum Institute, disputed the allegation. "The criticisms simply don't hold up when you look at the numbers. The year-to-date increase in gasoline prices is about 76 cents/gal. Crude prices, for the same period, are up 94 cents/gal. So the full increase for crude prices has not been passed on because demand is soft," he told OGJ Washington Pulse on Mar. 28.
"We have record production of gasoline so far this year and record production of diesel fuel," Felmy added.
Unlike recent years, gasoline supplies are plentiful, demand has fallen "and increased amounts of less expensive ethanol is being blended into more than 60% of the nation's gasoline," the CFA report said.
It also said that increased prices helped the profits of large oil companies in the Department of Energy's Federal Reporting System grow from $20 billion in 2002 to $100 billion in 2006 and 2007. The group's return on equity has been higher than manufacturing overall in six of the last seven years, it added.
"The excessive profits by these companies since 2002, above the normal return on equity earned by all manufacturing, equals over $190 billion in after-tax dollars, which makes the pre-tax total increase in income about $280 billion," the report said.
Felmy said that he found the comparison questionable. "In 2002, refiners were breaking even or losing money, so calling the increase excessive is bogus. It's simply picking the lowest possible starting point as a basis of comparison," he said. The new CFA report simply rehashes points Cooper has made previously, the API official said.
Contact Nick Snow at firstname.lastname@example.org