Big Oil attacked over record gas prices

[NeoConsSuck]

Source: CNN.COM

Big Oil went on the defensive Wednesday, getting grilled before a House panel and denying accusations that mismanagement and a lack of competition are the reasons behind this spring's record gasoline prices.

Gas prices hit $3.10 a gallon Wednesday, according to AAA. It's the fourth record day in a row, and the surge has been attributed to low gasoline supplies caused by a lack of refining capacity.

They have no interest in building spare capacity because that would undermine their pricing power," Mark Cooper, research director for the Consumer Federation of America, said prior to a hearing by a House Judiciary Committee antitrust panel in Washington Wednesday.

At the hearing, monitored on television in New York, Cooper was just as blunt.

"This is a picture of fundamental market failure," he said. "And Congress and the administration have stood by and done nothing to help consumers."





Read more: http://money.cnn.com/2007/05/16/news/economy/gas_prices/index.htm?cnn=yes

[wordpix]

1. I saw part of this, an oil exec was saying the higher prices went, the worse it was for Big Oil

I nearly cried me a river. It was like hearing King Gorge say the more they cut taxes on the rich, the better it was for the Treasury. Black is white and disaster is good.

[Lint Head]

2. Getting grilled by a house panel does nothing.

Petty criminals need to be released from jail to make room for all of the corporate and political liars and criminals that this country needs to put in jail. :dem:

[rurallib]

5. no penalties = no accountability.

[whistle]

3. My local Shell gas station actually dropped the price two cents to $2.959

...I was shocked! It was $2.979 last week when I filled up

[unkachuck]

4. funny, my local Citgo....

....was jacking up the price from $3.459 to $3.559 this afternoon while I was pumping gas....

....if we had a real democracy we could have the government get into the oil business and offer some real competition to these corporate thieves....better yet, if we had a real democracy we could nationalize this vital industry for the 'war effort'....

[beyurslf]

6. Here where I live gas is normally right at the national average, maybe plus or

minus a cent. On Wed this week, it was 3.09 here.

Today, gas jumped to 3.19 so expect the average to go up a dime.

[radfringe]

9. up a dime since Monday

monday morning $2.89
Tuesday morning $2.94
Wednesday morning $2.99

[Alcibiades]

7. At what point to the peasants grab their pitchforks

and their torches and storm the castle. This is America. We will put up with a lot of poop, even really stinky poop, but cheap oil is our birthright.

Every chance you get, remind people that gasoline was around $1.40 a gallon when Clinton left office.

Typical of the Bushies. Nobody could have predicted that a hurricane would hit New Orleans, or that a big one would, or that the levees would break. No one could have predicted that starting an endless war of choice in the middle east would increase gas prices.

[laconicsax]

8. This line says it all:

They have no interest in building spare capacity because that would undermine their pricing power

Isn't that how a monopoly works?

[WannaJumpMyScooter]

10. Standard Oil got broken up over less

than this one statement.

Where is the Justice Dept on this?

[stlsaxman]

13. uh... the Justice Department is under investigation

thus giving criminals time to pillage!

[hootinholler]

20. Refused to look into it.

There was a thread yesterday claiming that 50 State AGs have asked DOJ to investigate, and AGAG said no thanks.

-Hoot

[WannaJumpMyScooter]

21. yeah, I saw that this morning

figures

[muriel_volestrangler]

15. It's more a 'barrier to entry'

See http://en.wikipedia.org/wiki/Barriers_to_entry

There isn't a monopoly - there are many separately owned refineries - and they aren't a cartel either (at least there isn't any evidence they are actively colluding on this). But the economics are clear to them all - it's very difficult for anyone else to build a new refinery (high cost, and the difficulty of getting permission for a huge, locally controversial, chemical plant), and each company can make more money by running as they are, and just closing old refineries as they become inefficient, than by investing in new plant that would drive down the price of gas.

This is a good example of a market failure.

[Orsino]

18. ...or what used to be called a trust.

A near-monopoly hidden under a handful of nominally separate business names.

[Hawkowl]

26. No It's more an oligopoly

With passive price collusion. Meaning the three or four companies only have to match their "competitors" price increases and reap record profits. Free markets and no regulation doesn't work with oligopolies. Unfortunately that is the dominant paradigm in our economy. Just a few companies in every major industry such as automobiles, insurance, banking, grocery stores, even farming (e.g; ADM) is heading that direction. In order to have capitalism really work you need competition between many companies or you don't have competition at all. At least not on pricing their products to consumers.

And yes since gasoline is very demand inelastic, the higher the price goes the more profit the oil companies make. At what price do you stop driving and ride your bike a few hours to work? I fly jets for a living and jet fuel is only about $2.25 a gallon. The oil companies are raping us and enjoying every minute of it. Looks like the Iraq war has accomplished its objective of limiting the supply of oil.

[NickB79]

24. Why should they build any new capacity?

Global oil production is at peak right now. By the time any new refineries would come online 5 yrs from now, there won't be extra oil for them to refine, and they will sit idle.

Advocating for new capacity to solve our energy problems is to not realize the gravity of our situation. Cheap oil and gas is gone forever, and we must change our society and behavior to deal with it, not grasp at ultimately futile plans to carry on our wasteful lifestyles another few years.

[Critters2]

25. Well said. Thank you. nt

[brentspeak]

11. Some Big Oil CEO stooge the other day was blaming it all on not drilling in ANWR

and how the oil industry (get this) needed more taxpayer dollars to subsidize the building of more refineries.

:eyes: :eyes: :eyes:

[lakeguy]

12. the House should focus on more important things...

like reducing our dependance on oil. this is all talk and nothing will come of it except for a waste of our tax money and time.

gasoline inventories are at an all time low because of record demand. why not grill the american car manufacturers about why they aren't selling more fuel efficient cars? it's true that new refineries haven't been built but capacity has still been expanded. but, with record US demand causing record record low inventories...and no dent in demand because of the higher prices, you'll get even higher prices.

i'm no fan of big oil and think we should have a nationalized system. but, the price would not be that much better because demand would remain the same. or you could build some new refineries and eat that cost, driving up prices. not too smart in a world with declining oil supply.

people need to quit complaining and reduce their consumption. next time you fill up, think about ways to reduce your own demand. i sold my car and bike to work. it sucks sometimes, especially since it's 20 miles round trip. winter is really tough but it's possible. bus takes longer than biking so that's not an option. most people won't even consider this and there are some that just plain can't. many people can though but won't. complaining is easier.

until we reduce demand, prices will keep going up. see the charts in at the website below. there is no need to gouge when supply is this low, people will pay or go without. we'll be lucky if everyone has access to gas this summer the way things are going. $3 will be nothing if this happens.

http://tonto.eia.doe.gov/oog/info/twip/twip_gasoline.html

[xchrom]

14. attacked? i really object to that descriptive --

these guys are fucking over the country.

they are not being attacked -- they are rightfully being questioned.

[leftofthedial]

16. much overwrought handwringing

and Congressional protestations that they are SHOCKED, SHOCKED to even suspect that the oil industry might be price gouging . . .

but the oil executives denied gouging, explaining that there is a special section of pipe in Houston that all oil now has to pass through so that shamans can dance, shake their rattles and sprinkle the oil with magic dust before it is turned into gasoline. This is very expensive, but it totally necessary. This process can not be duplicated anywhere else because the magic dust only exists in Houston.

Members of the committee, satisfied that the oil companies are doing all they can to streamline gasoline production and worried that the oil executives might be suffering undue stress from constantly having to adjust their prices and bonuses upward, agreed to address the problem by allowing the oil company executives to pay for lunch at an expensive Washington DC restaurant.

One congressman, who asked to remain anonymous, did call the oil companies to task for a possible impending supply side disaster. Apparently, there is a serious ongoing shortage of large red plastic "3's" for the signs that display gas prices at the stations. An even more serious shortage of "4's" looms for this fall. If this possible shortage is not addressed soon, it threatens to completely paralyze the oil industry in early October and could trickle down throughout the economy, weakening the positive effects of layoffs, outsourcing, foreclosures and further tax cuts for Bill Gates and Warren Buffett.

[Vinca]

17. I missed the hearing. Did anyone think to ask them why they couldn't

cut their earnings the odd billion or two so the American people might purchase food for their children during this supply "shortage??"

[lpbk2713]

19. Limbaugh will stand up tall and proud to defend them, you can count on it.

Limbaugh is Big Oil's most loved and most highly paid spokesman.

[LSK]

22. link to house hearing webpage with statements

http://judiciary.house.gov/oversight.aspx?ID=323

[Rageneau]

23. NATIONALIZE the U.S. oli industry now!

[Hawkowl]

27. Agree 100%

That is what the rest of the world had done. Roughly 85% of the worlds oil has already been nationalized. Just think by having the taxpayers pocket the oil companies' profits and ending the war in Iraq, that would save about $400-500 billion per year. Deficit problem solved.