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Record oil industry profits squeeze household budgets

Domestic companies account for over three quarters of recent price spikes

Friday, Oct. 29, 2004
Contact: Mark Cooper, (301) 384-2204
(Washington, D.C.) — U.S. oil companies’ profits for the first nine months of this year have increased by more than 35 percent over last year, with the bulk of those profits coming from charges for domestic oil and gas refining, not from higher crude oil prices, consumer groups say.
Consumer Federation of America and Consumers Union say the record profits, coupled with the Department of Energy’s latest report that heating oil prices have hit a new record –$2.06 per gallon –are a clear indication that oil companies are profiting at the expense of American consumers.
“After analyzing the most recent quarterly statements of the domestic U.S. oil industry, it is not only clear that profits have climbed to record levels, but that the major source of those profit increases is the jump in domestic refining and marketing margins,” said Mark Cooper, director of research for the Consumer Federation of America. “Well over half of that increase in profits has come not from crude oil, but from profits on domestic U.S. refining and marketing.”
“While the media and the Bush Administration blame OPEC,” added Gene Kimmelman, senior policy director for Consumers Union, “a close look at prices and profits shows that a large part of the problem is in domestic markets. As the Government Accountability Office recently concluded, mergers and the resulting concentrated markets have contributed to the problem.”
Cooper said the analysis shows that profit margins on refining and marketing – known as the domestic spread – have set records for gasoline, heating oil and diesel fuel in the past nine months. Since domestic oil companies profit from U.S. production when prices rise, almost three-quarters of the price increases for oil products and 90 percent of the increase in natural gas wellhead prices have gone to domestic, not foreign oil firms.
Cooper pointed out that “last spring and summer it was gasoline, now it is heating oil and diesel fuel that are setting records. Household budgets are being continually pounded by these rising prices.”
• Household expenditures for petroleum products – gasoline and heating fuels (natural gas or heating oil) have increased by 20 percent in the past two years.
• Over the past four years, household expenditures on petroleum products have increased by about $1,000 per year.
• For all but the wealthiest 20 percent of American families, rising petroleum prices have eaten up the entire Bush Administration tax cut.
To view an analysis of the latest oil company profits click here.
To view recent research reports on oil industry prices and profits click here.