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Thank you, Madam Speaker. You're doing a bang-up job.

The Great Oil Robbery

By Dave Lindorff
Created May 8 2007 - 10:12am

In case you're wondering why crude oil prices are down from last year,
hanging around at about $60 a barrel, while gasoline prices have soared
past
$3.10/gallon nationwide, just check out the latest profit reports from the
oil companies. They are at record levels.

The answer for this seeming contradiction is simple: Americans are being
robbed blind by the oil industry.

Sure, the oil companies, and their PR and lobbying agency, the American
Petroleum Institute, will give you all kinds of reasons for higher
gasoline
prices at a time of falling crude prices: problems at two refineries in
Texas and Oklahoma, rising demand or whatever. But the real answer is that
there is simply no competitive market in this industry.

As Tim Hamilton, a researcher and petroleum industry consultant with the
Foundation for Taxpayer and Consumer Rights, observes, the oil companies
all
store their crude oil and refined gasoline in the same tanks, and all know
exactly how much inventory each other company has, so they don't have to
meet and collude on pricing in order to reap the huge rewards of
deliberate
supply constraints.

Says Hamilton, "Years ago, you had companies that would try to guess when
the other companies were going to have supply shortfalls of gasoline in
the
summer. They'd ramp up their own gasoline refining and then supply the
market at a lower price and eat their competitors' lunches, the same way
General Motors would do if Ford had a problem on its assembly line. But
today, no oil company would do that. They all benefit by keeping the
supplies tight."

Hamilton says that the oil industry has in practice conspired to limit
refining capacity, so that companies can keep pushing up the price of gas
artificially--only they've done this without ever having to meet in secret
and cut a deal, because they all have complete competitive information on
each others' inventories, internal pricing, and refinery capacity.

"There's no correlation any longer between crude oil prices and gasoline
prices," he insists. "Crude could drop to $10/barrel, and you could still
have gasoline go to $4/gallon. All the crude oil price does is set a floor
on gasoline prices."

As an indication of how much control the oil industry has over retail
gasoline prices, Hamilton points to a study he did, looking at the price
of
gas approaching Election Day. His results are truly disturbing.

The oil industry has been a solid backer of Republicans for many years,
giving 80-90 percent of its campaign contributions to GOP
candidates--particularly during the two Bush terms. What Hamilton
discovered
is that this support hasn't just been limited to campaign contributions.
In
fact, the oil industry appears to have clearly tried to minimize voter
anger
at Republicans late during the election cycle by pushing prices at the
pump
down just ahead of the voting. In the period 2000-2006, Hamilton found
that
each non-federal election year--2001, 2003 and 2005, gasoline prices
didn't
decline during the month of October, but each of the election years--2000,
2002, 2004 and 2006--they fell, with the most dramatic drop coming in
October 2006--a period when crude oil prices were rising sharply. Each
time,
gasoline prices rose again quickly right after the election was over.

"This is a set of coincidences you'd be hard-pressed to explain by
anything
but planning," says Hamilton. (And incidentally, it would be interesting,
when Congress gets those Karl Rove emails from the Republican Party and
the
White House mainframe computer, to see if there are any to the American
Petroleum Institute.)

The whole situation makes a joke of Bush proposals for opening up the
Alaskan North Slope to more oil exploration, or for Republican calls for
an
easing up on environmental regulations for new refinery construction. Says
Hamilton, "The price of oil produced in Alaska will be set in Saudi
Arabia,
and any new supply of crude from Alaska won't affect American gasoline
prices in the slightest. And as for new refineries, why would any oil
company want to spent $1 billon or more to add refinery capacity so they
could get less money for the gasoline they're selling? There isn't enough
money in the federal treasury to subsidize the building of new refinery
capacity in America."

The irony here is that it is higher prices for gasoline that might
eventually convince Americans to use less gasoline, and to reduce the
production of greenhouse gasses. But where those higher prices in Europe
come in the form of taxes, which can then be used to subsidize public
transportation or retirement and healthcare programs, in the U.S. the
higher
prices simply go to the bottom line of the oil companies, and into the
pockets of oil company shareholders, leaving public transit, retirement
and
healthcare programs under funded, and leaving lower-income workers stuck
with higher bills to get themselves to and from work in their cars.

Until the public recognizes that the illusion of competition carefully
maintained by the oil industry and its backers in the government is just
that--an illusion--this astounding rip-off will continue.

Until this mess is finally straightened out, if ever, buy oil company stock.