Bob Tippee
Editor
Timing makes the latest congressionally inspired investigation of the US oil industry look—to put it politely—seriously uninformed.
In May, the Connecticut congressional delegation asked the Government Accountability Office to probe relationships between refining capacity and gasoline prices.
The lawmakers had noticed that refining capacity utilization was down in April and disputed parallel arguments that refinery outages helped explain gasoline price increases early in the year.
"Increasing prices lead to higher profits for refiners, and a calculated decrease in refining capacity could create an artificial shortage and drive up the cost to consumers," they wrote in a letter to GAO.
At the same time, Sen. Charles Schumer (D-NY), chairman of the Joint Economic Committee, sent a similar letter to GAO.
On Sept. 24, members of the Connecticut group announced that the GAO had agreed to combine the requests and review refiners' behavior "to determine whether market and supply manipulation has occurred as well as to what extent their practices influence fuel prices" (OGJ Online, Sept. 26, 2007).
Like many predecessors, this investigation won't find misbehavior. No one makes money by refusing to sell something. But American political thinking just can't grow out of mindless suspicion to the contrary.
The core of the lawmakers' suspicion is that refiners were deliberately holding product off the market, not having the very real maintenance troubles that did suppress refinery operations just before the driving season.
But consider what happened after the lawmakers sent GAO their request—after refiners solved the operational problems in which faulty legislation played a role.
Gasoline production by US refiners in June set a record of 9.3 million b/d, according to the American Petroleum Institute. It reset the record in July at 9.325 million b/d. Record output of all products has pushed heating oil stocks to comfortably high levels as winter approaches, API reports.
Record-setting production is not the behavior of an industry trying to manipulate prices. It's rational business behavior. It was predictable.
That predictability could have kept Schumer and the Connecticut gang from sending GAO on yet another witch hunt. Apparently, they'd rather look suspicious than rational.
(Online Sept. 28, 2007; author's e-mail: [email protected])