by John M. Curtis
(310) 204-8700

Copyright May 14, 2007
All Rights Reserved.

asoline hit record highs at the pump Monday, pushing the price of unleaded regular to $3.057 as measured by the AAA and Oil Price Information Service. Prices in California, known for nation's highest prices, have already jumped in some areas to over four dollars a gallon, proving, if nothing else, that Big Oil plans to push the pedal to the metal, gouging consumers for the foreseeable future. Big Oil has two good friends in the names of President George W. Bush and Vice President Dick Cheney, who've sat idly by while oil companies recorded obscene profits at the expense of the economy. As pump prices continue to soar, it's becoming abundantly clear that the prices of gasoline isn't linked to the price of oil. Pump prices were 33% lower when crude prices hit $72 a barrel in Sept. 2005 in the wake of hurricane Katrina. Only Big Oil's profits eclipse runaway gas prices.

      Crude oil futures for June delivery dropped to $62.46 on the New York Mercantile Exchange, while gasoline kept rising. No one's pointing the finger at China and India for today's runaway gasoline prices. “You just get a feeling that $3 a gallon . . .It's got to have an impact from a demand standpoint,” said Chip Hodge, energy portfolio manager at John Hancock Financial Services. “So, maybe there's a little bit of a sell-off on those pressures,” acknowledging how traders drive the prices up or down. Specialists at the Nymex, together with Big Oil's involvement with Madison Avenue, find any public relations stunt to justify driving up prices. More than ever, Big Oil's refineries determine gasoline prices, making every excuse why capacity has been compromised. Any global or domestic news about refineries, including routine maintenance, affects gasoline prices.

      Big Oil's refineries have a monopoly on gasoline production, directly causing today's runaway pump prices. Bush and Cheney have given Big Oil the green light to fleece consumers and harm the economy. There's virtually no regulation on the refining industry, requiring them to maintain capacity standards. Big Oil's refineries take their cues from Nymex specialists concerned that oversupply causes precipitous drops in wholesale prices, leading to lower profit margins. While Chevron lowered its California refining output 22% in 2007, gasoline prices hit record highs. There's go guidance to refining industry from the White House, Department of Energy or the Commerce Department, all have a vested interest in maintaining adequate gasoline inventories. Refiners shouldn't strangle the market, drive prices through the roof, fuel inflation and harm the economy.

      Refineries currently get away with murder at the expense of businesses and consumers. Runaway gasoline and diesel fuel prices have a chilling effect on the economy. While the Federal Reserve Board tries to separate energy prices from core inflation, the truth is the two are inseparable. High fuel prices drives up the cost of landed goods, forcing transportation companies to raise prices. Allowing Big Oil to manipulate gasoline and diesel fuel inventories reveals cynical control of otherwise free markets. There's nothing free about refiners deciding to take refineries offline to squeeze inventories and drive prices up. Consumers find rising energy prices a punitive tax, penalizing thrift and looting discretionary spending needed to fuel two-thirds to the country's economy's growth. Without robust consumer spending the economy loses steam and heads into recession.

      Short of a windfall profits' tax, Cheney's energy task force, that met privately in 2001 to set U.S. energy policy, should meet with industry executives and get on the same page about Big Oil's responsibility to the economy and national security. Allowing Big Oil to assert its cartel by taking refineries offline to manipulate gasoline supplies harms consumers, industry, the economy and national security. Instead of giving Big Oil the go-ahead to gouge, Bush and Cheney should pressure the industry to contain the current feeding frenzy. “Tightness in the U.S. gasoline situation will continue to drive the market . . . because the summer season is right around the corner,” said Victor Shum, energy analyst with Purvin & Gertz in Singapore, suggesting there's nothing that can be done to curtail Big Oil's appetite for profit. Bush and Cheney need to do more than say “right on!”

      Big Oil's stranglehold on refineries currently threatens consumers, business, the economy and national security. Too many excuses, not enough responsibility and unbridled greed has left Big Oil the country's No. 1 economic threat. Runaway gas prices fuel inflation, which, in turn, forces the Fed to tighten credit, leaving consumers and businesses squeezed and the economy on shaky ground. “There's not a lot of time for refineries to catch up with demand,” said Shum, reminding Big Oil to show more consistency. As long as Nymex specialists drive prices into outer space, there's little hope for consumers or industry, other than insisting elected officials take a more active role in regulating refinery production and gasoline inventories. Big Oil can't continue to nail down record profits at the expense of consumers, business, the economy and national security.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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