April 18, 2006
New Gasoline Study Shows Profits, Not Crude Oil Prices Or Ethanol, Are Driving Pump Price Spike
Santa Monica, CA -- The Foundation for Taxpayer and Consumer Rights released a new study today of rising gasoline prices in California that found corporate markups and profiteering are responsible for spring price spikes, not rising crude costs or the national switchover to higher-cost ethanol, as the oil industry claims.
Click here to download and read the study.
Independent petroleum consultant Tim Hamilton analyzed gasoline price increases from January to April to find that:
Increases in the "spot" market price of crude oil -- which is the highest price a major oil company would pay for crude oil -- accounted for only 12 cents per gallon. California's percentage sales tax increased fuel prices by another four cents per gallon. More than 40 cents of the 60-cent increase in gasoline prices over 3 1/2 months is attributable to increased refinery and marketing profit margins for the oil companies;
Neither the MTBE phaseout nor the substitution of ethanol is a serious part of the increase. If the MTBE phaseout or ethanol blending specifically increased costs for oil companies in California, other states in the West using conventional unblended gasoline should be much less affected. Yet Washington State, which uses only conventional gasoline and has similar refinery capacity and crude oil sources, mirrored California's increase;
The profit increase of 42 cents, on top of record profits last year, means California gasoline will cost consumers approximately $546 million more in April 2006 than in April of last year.
"While oil companies continue to blame crude oil prices and ethanol additives for the recent gasoline price spikes in California, the chief cause is increased profiteering by oil companies that have previously posted world record profits," said Hamilton.
"Oil companies are opportunistically using the rising world price for crude oil as an excuse to excessively raise gasoline prices and pump up their profits, even though the spot market price for crude has gone up far more slowly than gasoline prices," said FTCR President Jamie Court. "In addition, the spot price is higher than most oil companies pay, since they either harvest their own crude or pay more stable and often much lower contract prices.
"This study should be a wake-up call for California voters who will vote in November on a ballot initiative to tax windfall profits by oil companies so the state can develop alternatives to the petroleum economy."