[Mb-civic] High Gas Prices Result of Industry Profits, Watchdogs Say

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    	http://newstandardnews.net/content/index.cfm/items/2261 
	

High Gas Prices Result of Industry Profits, 
Watchdogs Say
by Michelle Chen
Consumer advocates point to skyrocketing oil profits as evidence that 
the current rise in gas prices is the result of greedy companies and a 
corporation-friendly government.

New York City, Aug 22 - When New York cab driver Mohammad 
Faruque pulls his taxi into a downtown gas station, he knows he is 
losing money by the minute.

"The more I drive, the more it costs," he said. Fuel eats up about $40 
of his earnings from each ten-hour taxi shift, so, "Whatever I make, 
almost all of the money goes in the gas."

With local prices hovering around $2.70 a gallon, Faruque is one of 
countless motorists nationwide who find themselves emptying their 
wallets to fill their tanks.

Department of Energy analysts have blamed the high prices on a rise 
in crude oil costs, caused by growing worldwide demand and economic 
instability in the conflict-ridden Middle East.

But groups watching the energy industry say this is only part of the 
problem. The real culprits, according to public interest organizations 
like the Sierra Club and Public Citizen, are oil and gas corporations, 
which exploit consumers with the backing of pro-industry government 
policies.

Public Citizen analyst Tyson Slocum said that the federal government 
has allowed corporations to manipulate prices and perpetuate an 
unsustainable oil-based economy. Politically influential oil 
conglomerates, he said, are "very upfront about what they want from 
Congress, and they're very happy about what they get."

So far, the fuel market has given the industry little to complain about. 
While drivers balk at gas prices that are about 35 percent higher than 
what they paid last summer, oil companies boast unprecedented 
profits. ExxonMobil and ConocoPhillips, for instance, recently 
announced that quarterly earnings had increased over the past year by 
approximately 35 and 50 percent, respectively.

Although current gas prices – when adjusted for inflation – are still 
below the historical high, the potential effects of this summer's price 
spike reveal the scope of the country's dependence on oil.

"When you're filling up your own tank, you're most aware of the high 
fuel prices, but that's only the beginning of where it impacts your life," 
said Sean Comey, a spokesperson for the California State Automobile 
Association, which advocates on behalf of the state's gasoline 
consumers.

Consumer groups warn that higher fuel costs could drive up retail 
prices by raising the cost of transporting goods. Meanwhile, more 
expensive gas could also impact consumer spending by cutting into 
the budgets of working households.

"High oil prices impact
 the most vulnerable in society," said Ana 
Unruh Cohen, an environmental policy fellow with the liberal think tank 
Center for American Progress.

Critics of current national energy policy say that gas market volatility 
could be avoided if the government took measures to curb the 
country's dependence on oil and other fossil fuels.

The growing cost of gasoline, said Sierra Club analyst Brendan Bell, 
symbolizes "the failure of Congress and various administrations not to 
really put us on an innovative energy path over the past 20 years."

The Sierra Club and other environmental groups say that one partial 
remedy, which the automobile industry has resisted, would be simply 
making cars go further on a gallon of gas. The current federal 
standards for vehicle fuel efficiency have not been updated for nearly a 
decade.

If the average automobile were designed to go 40 miles per gallon, the 
nation would decrease oil consumption by three million barrels per day, 
the Sierra Club estimates, in turn reducing US demand for oil. The 
amount conserved, according to the group, would be more than what 
the United States imports from the Persian Gulf.

But consumer advocates say initiatives to reduce demand may be 
ineffective as long as energy conglomerates have the power to 
capitalize on, and even deliberately orchestrate, higher fuel prices.

Public Citizen has charged that the increasingly consolidated oil 
industry makes gasoline artificially scarce by limiting production at oil 
refineries.

In California, for example, the California-based public interest group 
Foundation for Taxpayer and Consumer Rights (FTCR) traces the 
trend to a handful of corporations that run 90 percent of the state's 
refining facilities.

Jamie Court, FTCR's president, said that the state's requirement for a 
specially refined fuel formula, designed to meet environmental 
standards, places "power in the hands of the people who make that 
refined supply, that lets them rig the market." The oil industry, he said, 
is thus able to keep inventories artificially low and prices even higher 
than in other parts of the country. Gas prices in California exceeded 
the national average by as much as 17 cents this month.

Across the country, the gasoline industry is becoming more 
concentrated. Public Citizen reports that, as of 2003, over half of the 
country's refinery capacity was controlled by five oil companies, 
compared to about 35 percent in 1993.

In 2001, Federal Trade Commission investigators uncovered that gas 
companies had deliberately suppressed supply to keep prices high in 
the Midwest. Yet, because the commission found that the firms had 
acted independently -- not in cooperation -- to fix prices, they 
determined that the companies had not violated antitrust laws.

Responding to public anxiety about gas prices, the energy industry has 
tended to shift the focus from its own practices to what is sees as 
"short-sighted" government policies.

Earlier this year, Bob Slaughter, president of the National 
Petrochemical and Refiners Association, testified before Congress that 
federal energy policy should prioritize "maintaining the flow of adequate 
and affordable gasoline and diesel supplies" by keeping government 
regulation to a minimum. The association pressed Congress to permit 
more fuel exploration on protected federal lands, including the North 
Slope of Alaska, and to restrict environmental protections that it said 
could impact the country's supply.

Striving to counter the industry lobby, public interest groups have 
pushed the government to check corporate profiteering and to invest 
more in energy alternatives.

The Center for American Progress, for example, has recommended 
efficiency-based guidelines for vehicle prices to ensure that more 
efficient cars are cheaper, as well as programs to help low-income 
people purchase more efficient cars at discounted rates.

In Congress, Senator Dennis Kucinich (D-Ohio) has introduced 
legislation that attempts to stabilize gas prices by both reining in oil 
companies and reducing the amount of gas US consumers use. The 
bill would impose a "windfall profit tax," which would skim money from 
gas and diesel sales that exceed a certain "reasonable" profit level, 
determined by an appointed board. The tax revenue would then 
subsidize purchases of more fuel-efficient vehicles.

But the environmental community's hopes of reshaping the energy 
system have sunk since Congress passed the 2005 energy bill, signed 
into law on August 8. The legislation includes ample subsidies and tax 
breaks for fossil-fuel-based industries, largely to the exclusion of 
greener alternatives.

"Despite $2-a-gallon gas and despite 140,000 troops in Iraq and 
despite rising global temperatures," Cohen said, "there isn't a lot of 
political will to take this on."

Cohen predicts that the country will eventually have no choice but to 
confront energy issues, as humans steadily drain the world's supply of 
petroleum. "We've really designed our cities and our lifestyle around 
the automobile and driving places," she said, "and I think we're going 
to see a painful readjustment."

Yet as the prospects for an energy overhaul remain distant, swelling 
gas prices are currently leaving millions of Americans with little room to 
adjust.

Aside from turning off the air conditioner when he is not carrying a 
passenger, cabbie Mohammad Faruque cannot do much to limit the 
amount of gas he uses, and has even less control over the price he 
pays. "If I drive less," he said, "then 
 it will be very hard to survive."

© 2005 The NewStandard.

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