Maybe the agricultural perspective keeps politicians and reporters in parts of the US from understanding energy.
“Recent reports have indicated that US refiners are cutting back on US gasoline stockpiles in order to artificially keep prices high and inflate their bottom line,” wrote Sen. Claire McCaskill (D-Mo.) in a May 16 request for a Federal Trade Commission investigation of potential “wrongdoing” by the oil industry.
In a press statement, McCaskill cited a Kansas City Star article complaining that “refiners have kept US stockpiles below average by curbing production and exporting more gasoline.”
The article harrumphs about increased refining margins and profits of major oil companies.
“The idea that refinery profits are keeping gas prices from falling lower could add fire to recent criticism over oil-company profits,” it says.
Do Grain Belt politicians and reporters see everything backward?
In the US, qualifying farmers can receive rental payments from the federal government for land on which they grow no crops. The idle land supports prices for crops grown elsewhere.
This year, taxpayers will pay farmers an estimated $1.85 billion to produce no food on more than 31 million acres. They’ll also pay more for food than they otherwise would.
Observers to whom this makes economic sense might think refiners shouldn’t respond to commercial pressures.
Unlike farmers, refiners make no money when their refineries make nothing. What they make they must sell or store.
Domestic gasoline sales are sputtering. But forward price patterns discourage storage, largely because prompt prices are elevated by worry about immediate supply. For now, selling gasoline abroad can be more profitable than storing it.
This is business, not price manipulation. And yes, refining margins have widened recently. In February and March they were negative.
Gasoline prices will recede as Midwestern floods subside if Middle Eastern crude supply sustains no further jolts.
Relief thus might arrive just as another FTC investigation begins. When the probe, like its predecessors, reports no “wrongdoing,” the Kansas City Star will be on other stories.
(Online May 20, 2011; author’s e-mail: email@example.com)