FORUM: Sham Oil Shortage
While oil companies blame environmentalists, they dump product to boost prices.
Thursday, October 13, 2005
Refineries make the residential heating oil that warms most of America’s homes. Part of the reason home heating prices are skyrocketing is there are barely enough refineries to meet demand. Oil companies like it that way. A scarce commodity keeps their prices and profits high.
So the push is on in Washington to increase American refinery capacity. There’s one catch though. If we want to see prices fall, then oil companies have to sell their heating oil and petroleum products here in America, not in Singapore or Chile.
Right now, in a period of peak demand and limited supply, oil companies are exporting our heating oil all across the globe. That’s creating a shortage right here at home and driving up the price.
You see, right now, in a period of peak demand and limited supply, oil companies are exporting our heating oil all across the globe. That’s creating a shortage right here at home and driving up the price.
Department of Energy data show that oil companies exported one and a half billion more gallons of liquid heating products in the first seven months of 2005 than during the same period last year.
That amount is about 20 times greater than the size of the entire North East Strategic Reserve for heating oil. At the same time, the energy department numbers show that imports are falling.
With a severe winter warning, that’s a recipe for big profits for oil companies and impossible choices for consumers. The poorest will have to pick between food and keeping their families warm. It’s a choice no family should have to make in America.
Legislation that passed the House of Representatives last week gave new subsidies to oil companies to build refineries. But the bill put no restrictions on where the petroleum products could be sent. In other words it’s all carrots and no sticks for some of the fattest rabbits on Wall Street.
Oil companies can make plenty of money selling oil right here in America. So, why would oil companies export product away from the most expensive market in the world? To create a shortage that makes their products even more expensive.
Accuweather got it right today. It’s gonna be a cold, cold winter. But if Washington doesn’t wise up and stop Americans’ heating fuel from being sent abroad, it’s going to be freezing.
Homegrown Oil Cartel
American oil companies love to blame OPEC for jumps at the pump, but OPEC’s not to blame. It’s American refiners. Three dollars per gallon of gasoline here is the result of domestic oil refiners intentionally cutting capacity and inventories.
America’s big oil companies figured out long ago that they could make more money by making less gasoline. That’s why the industry hasn’t built a new refinery in 30 years. Since deregulation in 1982, oil consumption’s increased 33 percent, but oil companies have reduced refining capacity by about 10 percent. Why? They know the scarcer the product, the bigger the profit.
Conspiratorial? A few years ago US Senator Ron Wyden released internal company memos proving that in the late 1990s, refiners realized they had to reduce supply to pump up profits, and that’s just what they did. Oil companies love to blame those big, bad environmentalists for hurdles they can’t overcome to build new refineries. But one memo showed Mobil fought for tougher California rules to drive an independent refiner out of business. This year I had to fight to keep Shell Oil from closing an existing California refinery in the tightest market ever.
What’s needed is not supply-side economics but supply-side regulation. The Department of Energy already monitors oil refiners. Why not grant it powers to force oil companies to make supply meet demand? That includes requiring them to invest their record profits into making more gasoline.
Tax credits in the energy bill for increasing refining capacity, supply-side economics, won’t help. Without being forced, why would oil companies build new refineries? Any industry that can make more money by making less of a product is going to stay the course.
JAMIE COURT IS THE PRESIDENT OF THE FOUNDATION FOR TAXPAYER AND CONSUMER RIGHTS. FOR MORE INFO GO TO WWW.CONSUMERWATCHDOG.ORG.