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Thomas D. Elias column: Gas price gouging is obvious

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THIS STORY ORIGINALLY APPEARED IN APRIL 30, 2007'S EDITION

Just in case anyone still believes it's an accident oil companies like ExxonMobil and Chevron and BP and Shell have achieved record profits quarter after quarter during the last few years, here's some information that will utterly debunk such naive thinking:

As of early spring, crude oil prices were several pennies lower per gallon this year than last year. But the pump price of gasoline was considerably higher. In February, the average California price of $2.81 was nearly 24 cents higher than a year earlier and 45 cents above the national average. In early April, the average California price of $3.29 was 62 cents over the national average.

Today's price seems well on its way to topping the all-time average statewide high of $3.38 per gallon.

How can this be happening when oil companies continually tell us, their customers, that fluctuations in the price of crude an refinery problems are the major impetus for changes in their pump prices?

Easy. It's call gouging. As long as no significant gasoline retailer breaks ranks and the price at the pump remains fairly constant from one street corner to the next within a region, there is no reason for any oil company not to raise prices. So they do. That's how ExxonMobil made a record $39 billion profit during the third quarter of last year (about half the entire budget of the state of California, to put it into perspective, in just one quarter).

Lawmakers do nothing

But Exxon's profits dropped a tad in the fourth quarter, you might note. So did those of the rest of Big Oil.

The reason for that was clear and fairly well documented: Oil companies last fall did all they could to keep Republicans in the majority in Congress because no matter how high prices went during its reign, the GOP never did a thing to rein them in. No hearings questioning oil company executives about their pricing practices. No anti-gouging bills. Nothing.

And historically, when gasoline prices drop during the fall political season, the party in power stays there. So – surprise – prices dropped from last summer's peak average of $3.38 for a gallon of unleaded regular to about $2.20 just before Election Day last November.

The prediction here then was that prices would rise gradually starting the week after the election. And they did, with the average price in California now over $3.30.

There is, of course, no smoking-gun piece of evidence to prove that oil companies set their prices in concert, acting as a cartel. There is also no hard evidence that a combination of collusion and political opportunism led to last fall's unified price drop.

This may be because no one has either subpoenaed oil company e-mails and letters or eavesdropped on their telephone calls. It's also because state investigators have repeatedly thrown up their hands in frustration over their inability to get to internal oil company communications of all kinds. Only federal officials have the power to subpoena that material, and so far they have not.

But the fact is that during last fall, as prices fell, the difference in what oil companies paid for a gallon crude oil and what they charged for a gallon of gasoline at the pump dropped sharply. From a peak difference of $1.37 per gallon in October 2005 to a low of 85.9 cents per gallon in November, oil company margins fell by more than 50 cents per gallon.

But they started to climb once again the moment the election was history, standing last month at $1.22 per gallon.

This number means that while oil companies continue to insist there's a direct link between what they pay for crude oil and what they charge for gasoline, that connection has been altered, stretched or eliminated altogether during the last three years.

Maximizing profits

"These figures show that gasoline prices are not about the price of oil, but about maximizing the already obscene profits of oil companies and their refiners," said Judy Dugan, research director for the consumer advocate Foundation for Taxpayer and Consumer Rights.

The newest numbers and the repeated failures of state investigators also combine to show why a full-scale investigation of gasoline pricing should now become one of the highest priorities of the new Democratic majority in Congress.

Reach Thomas D. Elias, a long-time California political reporter: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

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