Political fallout from gasoline pricing practices continues to bedevil U.S. oil companies.
The controversy even has resurrected an ogre industry thought dead: the "windfall profits" tax. Sen. Bob Packwood (R-Ore.) plans to introduce a "modified" WPT bill after the Senate reconvenes Sept. 10, saying it will "discourage oil companies from taking unfair advantage of consumers."
Packwood's bill would impose a tax of as much as 70% on "excessive" profits from sale of U.S. and imported oil and be patterned after the WPT repealed in 1988.
No other details were available at presstime. Packwood's staff is working on the bill, expected to be referred to the finance committee, of which he is a member.
National Association of Royalty Owners calls a WPT "the last nail in the domestic oil industry's coffin."
NARO Pres. Jim Stafford said, "The recent hike in oil prices for domestic production was more an outgrowth of congressional inability to develop a sane national energy policy than greed on behalf of a few ragtag domestic producers who have no control over consumer pump prices."
U.S. Justice Department has questioned three large refiners and two independent gasoline marketers about their gasoline pricing policies since Iraq invaded Kuwait. Justice didn't identify them and said more firms will be questioned later. It is looking for price fixing or other antitrust violations.
Justice is investigating allegations by independent petroleum marketers that refiners provided gasoline to company owned stations at a lower price than they charged independents.
Sigma urges antitrust investigations of the majors, and PMAA may press divorcement legislation again. Amoco blasted Illinois Gov. Blanchard's call for divorcement and open supply legislation as "anticonsumer" and spiking gasoline prices.
API said it is "not privy to pricing decisions made by individual companies or service station dealers. We do believe, however, that although markets have been very unstable since the Iraqi invasion of Kuwait, members of the petroleum industry have been trying to act with restraint and responsibility. Evidence of this can be found by looking at prices quoted on U.S. spot markets, where petroleum prices change minute by minute, driven by the latest news reports from the Mideast."
API noted that, compared with levels prior to the invasion, spot crude prices rose about 25/gal and spot gasoline prices more than 35/gal through Aug. 22. In the same period, AAA reports, gasoline pump prices rose only about 16/gal.
In fact, current retail gasoline prices simply reflect industry's capacity constraints, says Refco Inc., New York.
According to the analyst, oil passthrough price hikes to the consumer closely track similar increases at the start of the last supply crunch, in November 1989, when low stocks and a brutal cold snap sparked a severe heating oil shortage.
The average of the first three heating oil crack spreads in 1989 was $6.72/bbl vs. an average $20.10/bbl for the first three major crude futures contracts expiring in first quarter 1990--a 3:1 ratio, Refco noted. Today, with heating oil and gasoline in short supply, the crack spread average is $9.12/bbl for gasoline and $9.72/bbl for heating oil against a crude value of about $30.80/bbl for the three key contracts expiring in the fourth quarter--also about 3:1.
"Current margins, as mirrored in oil futures contract values, are consistent with 1989 margins, indicating that products are fairly priced considering the rise in crude prices," Refco said.
Even at that, wholesale gasoline prices are sliding to reflect softening demand. Conoco last week sliced branded wholesale gasoline price 2-5/gal and unbranded gasoline prices by an average 10.65/gal. Phillips pared its average wholesale gasoline price by 5/gal. The day after OPEC's agreement to boost oil production, Nymex gasoline for September plunged by 17.1/gal.
Another factor in gasoline market softness is an apparent easing of the frenzied hoarding and tanktopping of early August. EIA data show U.S. gasoline demand soared by more than 1.2 million b/d to 8.6 million b/d the week after Iraq's invasion. For the week ending Aug. 17, U.S. gasoline demand plummeted to less than 7.1 million b/d.
Energy Sec. James Watkins is granting the 17 largest U.S. oil companies antitrust protection if they allow proprietary oil supply data given DOE to be forwarded to IEA. His approval contains anticompetitive safeguards such as a limit on disseminating disaggregated data and a ban on companies sharing data.
"IEA member countries have agreed to keep a close watch on the oil supply situation and to place our response systems on active alert," Watkins said. "This information will play a key role in our ability to assess the current situation and to coordinate a response by IEA nations, if necessary."
A Phillips group could decide this week whether to pursue plans to build Texport, the proposed $1.2 billion, 2 million b/d deepwater port for oil tankers 25 miles off Freeport, Tex.
U.S. companies press more environmental initiatives.
ARCO unveiled a smog testing program that will not charge drivers for the first routine inspection if their vehicles don't pass tough tailpipe emissions checks required biannually by California law. ARCO converted 112 MP&G tuneup centers to SmogPros express test and repair centers last month.
W.R. Grace's specialty chemicals unit plans to slash reportable pollution emissions by O/the next 5 years, in addition to an emissions cut of 477, in 987-88. It has doubled the number of people working on environmental initiatives and will spend more than $80 million on those initiatives this year.
The Soviets plan to open two areas to competitive bidding and are pressing for more upstream joint ventures.
Competitive bidding will involve 34,749 sq miles in the South Caspian and Amu-Daria areas of Turkmenia (see story, p. 38).
Meanwhile, Fairfield Industries Inc., Houston, will hold briefings later this year in Houston and London on exploration joint ventures covering about 386 sq miles in eastern Siberia's Yakut republic and acreage near Khanty-Mansiisk field in western Siberia's Tyumen region (see map, OGJ, June 4, p. 40).
The Yakut and Tyumen regions are near opposites, with Yakut blessed with joint venture tax incentives but no production and almost no infrastructure. Fairfield specializes in shooting seismic surveys in swamp, marsh, shallow water conditions descriptive of much of the Khanty-Mansiisk area.
More European companies hit the auction block.
Bp has invited a small group of companies to bid for its Dutch E&P unit, BP Explorative BV, which has interests in 23 blocks in the North Sea with net acreage of 1,670 sq km and two onshore areas with net acreage of 1,374 sq km. Included are four gas fields producing 14 MMcfd and two more under development that would boost the unit's net output to 17 MMcfd by 1994.
Elsewhere, Norway's DNO bought Santos' Peko Petroleum (U.K.) Ltd. for 34.6 million and reimbursement of advances extend d to Peko since June 30.
Independent U.K. gas marketer Agas, London, has finally landed a supply deal after being of access to North Sea gas. Agas will purchase ARCO's share of the 10% of Welland field reserves not being sold to British Gas.
Welland, in the southern U.K. North Sea, is to start production in October and build to 165 MMcfd. Agas is wrapping up sales pacts with several customers. Agas was established in 1988 as a joint venture by Associated Heat Services plc and Hadson Corp. In June, Elf acquired Hadson's 457, stake in Agas.
Spain's oil products retail monopoly Campsa SA says gradual liberalization of the country's oil market could cost it about $700 million. Much of the expense from acquiring previously state owned gasoline stocks worth about $300 million.
Spain's market is to be fully competitive in 1992.
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