Wednesday, May 10, 2006
US Oil Industry Made $100 billion in Excess Profits in Past Six Years
(Washington, D.C.) – Consumer groups today called for Congress and the Administration to act immediately on legislation to address price manipulation by the oil industry and to set concrete targets for reducing oil consumption. The Consumer Federation of America and Consumers Union cited lack of competition in the market, underinvestment in capacity, and mismanagement of short-term gasoline supplies for the six year trend in rising gas prices.
“Today’s gasoline prices highlight fundamental problems in the industry – a lack of competition that enables oil companies to exploit a tight market,” testified Mark Cooper, director of research for Consumer Federation of America, who testified before the House Energy Committee Wednesday. To read the testimony, click here.
“The prospect of sustained high prices at these levels is alarming to the average American household. If gas prices average $2.75 per gallon over the course of this year, the typical family household will experience an increase of well over $1,000 to their annual gasoline bill compared to the late 1990s.”
Last week the groups released a study on skyrocketing gas prices showing that the U.S. oil industry has made $100 billion in excess profits since the late 1990s, largely by eliminating refining capacity that paved the way to drive up prices at the pump. The report found that the difference between the cost of crude oil, and the price at the pump (net of taxes) is now about 40 cents a gallon higher than historical averages. That spike comes as a small number of large oil companies control both oil production and refining in the United States.
“The oil industry’s anti-competitive practices and mismanagement are gouging consumers and filling industry coffers,” said Ann Wright, senior policy analyst for Consumers Union. “Congress and the Administration need to take aim at abusive oil industry practices and protect consumers from unfair price hikes.”
CFA and Consumers Union are recommending Congress and the Administration take immediate steps to alleviate future spikes in gas prices. The recommendations include:
• Increased oil industry revenue funneled back into expanding our refining capacity.
• A strategic refinery reserve and a strategic product reserve that are dedicated to ensuring we have excess capacity sufficient to discipline pricing abuse.
• Mechanisms that prevent pricing abuse in the energy markets including formation of a joint task force of federal and state Attorney Generals to monitor the structure, conduct and performance of gasoline markets, with an emphasis on unilateral actions that raise price.
• Aggressive, concrete targets for reducing America’s oil consumption.
• A national policy that promotes the research, production and use of biofuels.
To get a copy of the report, click here.
Contact: Mark Cooper, CFA, 301-807-1623
Jennifer Fuson, CU, 202-462-6262