Oil Companies Flooding Market With Gasoline To Influence Congressional Elections
U.S. Oil Companies Flooding Market with Cheap Gasoline To Influence Congressional Elections
In 2005, U.S. Oil Companies spent over $33 million dollars lobbying Congress and the Bush Administration.
Table below shows what the major U.S. Companies spent in 2005.
Oil Company | Amount Spent |
ChevronTexaco | $8,550,000 |
ExxonMobil | $7,140,000 |
ConocoPhillips | $5,098,084 |
Marathon | $4,290,000 |
It is no secret about the huge amounts of money the oil companies spend for lobbying, political campaigns, and advertising. This has been going on for over a hundred years(advertising has used not only TV but also radio and newspapers). There has been a long history of the oil companies spending big sums of money to get favorable regulation treatment, get land and coastal areas opened for drilling, pass legislation favorable to oil companies, get huge tax incentives and tax breaks passed that are favorable to the oil companies, and to influence elections to get candidates elected whose views and goals are aligned with what the oil companies want.
In 1979, U.S.and British Oil Companies controlled 27.8% of the World’s oil production. In 2006, U.S.and British Oil Companies controlled only 14% of the World’s oil production. During current times it is a lot harder for U.S. or British Oil Companies to manipulate oil production because most of the World’s Oil Production is controlled by state-run companies from countries such as Saudi Arabia, Mexico, Venezuela, and others. In 1979 the United States imported less than 27% of its crude oil versus in 2006 it had to import over 66% of its crude oil. It would be difficult to make the argument that the U.S. Oil companies still have the ability in 2006 to manipulate crude oil prices.
The situation with refined gasoline is much different than the situation with crude oil. No new refineries have been built in the United States since 1976 and since 1993 U.S. refineries have been operating at 90% or higher of total capacity available. The United States refineries produce 88.2% of the refined gasoline used in the United States with the other 11.8% of gasoline requirements being supplied by imports of refined gasoline. The supply of gasoline from September 2005 thru July 2006 has been in short supply not only in the United States but also Worldwide. United States inventories of gasoline for 2006 thru the month of July have been generally less than inventories for the same time period in 2005. However, United States inventories of crude oil for 2006 have been well above inventories for the same time period in 2005. U.S.supplies of gasoline have been tight for 2006 thru the month July whereas the supplies of crude oil for the United States have been more than adequate for all of 2006.
The California Energy Commission has published some very interesting statistics on gasoline margins for the State of California on their web page,http://www.energy.ca.gov/gasoline/margins/ . The web page shows the various components such as taxes, crude oil cost, refinery cost and profit, and distribution/marketing/retail gasoline profits that account for the retail price charged for gasoline. Refinery costs and profits for 2006 for branded gasoline ranged anywhere from $.30/gallon to $1.08/gallon. Distribution/marketing/Profits are cost and profits incurred by the retail gas stations. The costs and profits for the retail gas stations for 2006 for branded gasoline ranged anywhere from -$.04/gallon to $.32/gallon. Why are the oil refiners able to have a wide range for their costs and profits($.30/gallon to $1.08/gallon) compared to the retail gas stations which have a narrow range for their costs and profits($-.04/gallon to $.32/gallon). The answer is there is a whole lot less competition for refiners than there was 20 years ago. The total refining capacity in the United States is approximately the same as what it was 20 years ago. The big and medium sized oil refineries have expanded their capacity while the less profitable smaller sized oil(usually independent) refineries have shut down. At the same time the big eight oil companies have merged into the big four oil companies in the last 7 years(Exon-Mobil, Chevron-Texaco, BP-Amoco, Conoco-Phillips). The big four oil companies who also own close to 50% of the domestic refining capacity have shown record profits for much of 2006.
If the supplies of refined gasoline have been tight for January-July 2006, how can the big 4 oil refineries flood the market with excess gasoline to influence the Congressional elections. Typically demand for gasoline drops off dramatically after Labor Day weekend. However, $3/gallon gasoline along with increased use of ethanol had dropped demand for gasoline prior to Labor Day weekend. Additionally we did not have any hurricane catastrophes shut down refinery operations in the Gulf of Mexico for 2006 that occurred in 2005. The big 4 oil companies who control close to 50% of the domestic refining capacity for the United States would normally reduce refining production if inventories of gasoline were dramatically increasing and prices of wholesale and retail gasoline were also dramatically dropping. Instead we see U.S.inventories continue to dramatically increase over an 8 week period from 11 Aug 2006 to 29 Sep 2006 at the same time that U.S. production of refined gasoline has dramatically increased. The two charts below show how for the last eight weeks, the United States refiners have had extremely high production rates well above 2005 levels while at the same time inventory levels have dramatically increased well above 2005 levels. During this same time, the retail price of gasoline has dropped from $3/gallon to $2.10/gallon because excess gasoline has flooded the U.S. market. The first chart shows that for 2006 prior to 11 Aug 2006 were only 2 times that 2006 production of refined gasoline exceeded 2005 levels for same time period by 500,000 barrels/day or more. For the eight weeks from 11 Aug 2006 to 29 Sep 2006, 2006 U.S. production of refined gasoline exceeded 2005 levels by 500,00 barrels/day for six out of 8 times. Additionally for the week ending 29 Sep 2006, production of refined gasoline exceeded 2005 levels for the same time period by 1.4 million barrels/day. The second chart shows that for 2006 prior to 11 Aug 2006, there were only 2 times that 2006 U.S. inventories of refined gasoline exceeded 2005 levels for same time period by 5 million barrels/day. For the eight weeks from 11 Aug 2006 to 29 Sep 2006, 2006 U.S. inventories of refined gasoline exceeded 2005 levels by 5 million barrels or more for 8 out of 8 times. Additionally for the week ending 29 Sep 2006, inventories of refined gasoline exceeded 2005 levels for the same time period by 19.6 million barrels.
