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Monday, 07 May 2007 00:12

California Gouged by Oil Companies

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A consumer watchdog group says that big oil companies are gouging Americans, and particularly California drivers, based upon a study that the group commissioned. That study says that gas prices and company profits are spiking while oil market prices remained stable. According to the North County Times, Judy Dugan of the Santa Monica-based Foundation for Taxpayer and Consumer Rights said the group hopes public outcry over rising gas prices will now force Gov. Arnold Schwarzenegger and the state Legislature to convene a special session to discuss the problem. The foundation says that California drivers are paying a "California penalty" of $7 to $15 more per fill up than what drivers across the United States, or about 40 cents to 55 cents more per gallon.

Tupper Hull, a spokesman for the Western States Petroleum Association, said such a session would be a waste of time, and that gasoline prices are rising because California has a limited supply of gasoline and spiking demand. The association represents Shell Oil and dozens of other drillers, refiners and marketers. "This industry has been investigated dozens and dozens of times over the last 20 years ... and they have looked at these issues time and time again," Hull said. "There has never been a finding that the industry has illegally, or otherwise attempted to manipulated the market. It's not doing that now." Hull said state legislators would be better served by "streamlining its very cumbersome permitting process" that he argues makes it nearly impossible for California refineries to expand and increase gasoline production.

The state's refineries supply 90 percent of its gasoline. The basis of the study was the tracking of daily crude oil prices on "spot markets" in Texas and California, and corresponding gasoline prices at the pumps, nationwide and in California, from March 2006 through April this year. The report was researched and written by Tim Hamilton, founder of a Washington nonprofit, Automotive United Trades Organization, an association of independent gas wholesalers and retailers. The study said the numbers showed that oil prices had remained relatively stable or even dropped over the year, but that gasoline prices spiked all across the country -- illustrating "that the once strong relationship between crude oil prices and gasoline prices appears to be broken." For example, the study reported that the price of a barrel of crude oil on April 14, 2006, was $68.85, while the average price of regular unleaded gasoline was $2.83 a gallon nationwide and $2.94 a gallon in California.

By contrast, the cost of a barrel of crude on April 13, 2007, was $62.58 -- $6.27 less -- while average gasoline prices were up: $2.92 nationwide, and $3.35 cents in California, increases of 9 cents and 41 cents, respectively. Susanne Garfield-Jones, spokeswoman for the California Energy Commission, said Friday that the price of crude oil typically makes up about one-third of the cost of every gallon of gasoline. The remaining costs, she said, come from taxes, refining and distribution. Garfield-Jones said the commission attributed the increasing gasoline prices to several factors. She said those include an earlier than expected increased demand for gasoline caused by mild weather and more driving; and a horrible start to the year for California gasoline refineries. She said California's refineries were currently producing about 800,000 barrels of gasoline a day, but that the state hopes they would eventually come up to speed -- about 1 million barrels a day. Dugan, meanwhile, said that big oil companies were purposely keeping supplies low, increasing prices and lining their pockets. "The gap between crude oil and gasoline is widening substantially, and oil companies, in some cases, are doubling their refining profits," Dugan said. At the end of April, oil giant Exxon Mobil Corp. announced a 10 percent increase in profits, its best-ever first quarter. Exxon Mobil, the world's largest publicly traded oil company, said it earned $9.3 billion from January to March.

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