October 29, 2007
Contact: Judy Dugan, or Jamie Court, 310 392-0522
Gasoline Prices Driven by Speculators’ Hot Air, Say Consumers
A gasoline price spike of more than a dime a gallon over the last two weeks is driven in large part by speculative and unregulated trading in crude oil, said the Foundation for Taxpayer and Consumer Rights.
With the price of a barrel of crude oil hitting another new record above $93, gasoline prices are also at a record level for this time of year, said FTCR. The average national price of regular is at $2.872 a gallon, up from $2.762 on Oct. 15, according to the federal Energy Information Administration. California is at $3.159 a gallon, up from $3.053 two weeks ago.
"Speculators in largely unregulated futures markets are using any excuse, from bad weather in Mexico to a dip in U.S. oil supplies, to drive crude oil toward $100," said Judy Dugan, research director of FTCR and its OilWatchdog.org project. "The world is not short of oil at this moment, and observers as disparate as OPEC and the Wall Street Journal are acknowledging that speculation is largely to blame. The victims, as usual, are ordinary motorists and people using petroleum products to heat their homes as winter approaches."
FTCR supports a Senate bill, the Oil and Gas Traders Oversight Act by California Sen. Dianne Feinstein, that would add transparency and federal oversight to unregulated futures markets in energy.
Gasoline prices, which dropped and stayed level for a few months after the all-time record prices of May, are being pushed upward by crude oil prices, but also by oil companies’ push to regain refining margins that have dropped from nearly a dollar a gallon in the spring, said FTCR.
"If oil companies seek a return to refining profit levels comparable to those of this spring, U.S. motorists will soon be looking $4.00 gasoline in the eye," said Dugan. "They can more than sustain their businesses on the less-than-record profits they are reporting in the latest quarter, and must not see the spike in oil prices as an excuse to resume inexcusably high refining profits."
FTCR noted that oil companies and their refiners do not pay the spot price for most of the crude oil they process into gasoline, diesel and heating oil. Some of it comes from the oil companies’ own drilling operations, at far below the spot price. Some is also supplied through long-term contracts that, in a time of rising prices, are set well below the spot price.