The Battle Over the Blame for Gas Prices

[cal04]

Firms Cite Supply Issues, Deny Abuse
When Severin Borenstein drove by a Shell station in Orinda, Calif., yesterday morning, the price of unleaded gasoline was $2.99 a gallon. When he drove by five hours later, the price was $3.10 a gallon. Borenstein has a better grasp of why that happened than most. He's a professor of business and public policy at the University of California at Berkeley and is director of the University of California Energy Institute. "The oil side is one piece of this. The refining side is another piece of this," he said.

Oil prices are soaring, with the price of crude at more than $70 a barrel on world markets and 37 percent higher than a year ago. That works out to more than $1.70 a gallon, more than half the cost of a gallon of regular unleaded gasoline. The next biggest chunk of the cost of a gallon of gasoline is the cost of refining, which is now about twice the average levels over the past five years.

And that has sparked controversy over whether oil refiners have been gouging consumers by holding back on expanding capacity to gain more power over prices. The oil companies deny those allegations, but what's not in dispute is what's happening at the gasoline pumps. "What's going on is just a continued reflection of the worsening supply-and-demand balance, and when you get into a tight market, small changes can cause big price movements," said Borenstein, explaining the rising price of crude oil.


He added that the reasons for fatter refining margins were not so clear. "This is the time of year when that number always goes up, but it has gone up more than usual," Borenstein said. "What we're seeing is that refineries are making huge profits. We have not been building refineries, demand continues to grow, and supply is not keeping up with it."

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http://www.washingtonpost.com/wp-dyn/content/article/2006/04/20/AR2006042000594.html

[madeline_con]

1. IMO, even though no one asked...

The oil giants are testing the market to see what it will bear.

Drive less, people.

[Imagevision]

2. Exxon reported yesterday of making 212 million more per DAY!

then one year ago.

[depakid]

3. Goobly goop from the post

[Wisconsin Larry]

4. Firms deny abuse when in five hours the price goes from $2.99 to $3.10?

The cost of the gas in the tanks did not change in five hours. The cost of the gas that would fill the tanks next month would be higher. But the price changed immediately. No wonder the oil companies have record profits or more accurately are profiteering from this situation. But no one either in Congress or the media would dare put the profiteers' feet to the fire.

But maybe we can. The best idea I've heard is not to buy gas from either Exxon or Mobil. Many of us have been buying just from CITGO owned by Venezuela but apparently we need more of us to do the same.