The San Francisco Chronicle reports:
"Profit margins at California’s gasoline refineries are soaring. And they’re taking pump prices along for the ride. Refinery profit margins have more than doubled since last fall, according to one rough measurement, and now stand at $39 per barrel on the West Coast. That’s more than double their average of $17 for the last five years."
It’s obvious that Chevron, the West’s largest refiner, and its competitors are cutting back on gasoline production to pump up their prices and their profits. California gas prices have been running 45 cents more than the rest of the nation, but Americans are suffering too. Gas prices are up about 40 cents across America over the last month. The price spike in early March, far off from summer drive season, is a symptom of a broken system that rewards shortages with serious profit. As long as oil companies can make more money by making less gasoline they will continue to keep the system running on nearly empty. Just-in-time inventories are a recipe for big prices and big profits. It’s time Congress considered regulating the nation’s gasoline supply to make sure supply and demand are in balance.
A less obvious reason for the uptick in prices is the short term loss in the refining business that oil companies took in the fourth quarter of 2006, a.k.a. during the run-up to the mid-term election. Oil companies clearly flooded the market with fuel in October to keep gas prices low and the American public less angry about an oil industry that gave 86% of its campaign cash to Republicans. On election day, gas prices started to drift back up. When President Bush said he would build out the strategic petroleum reserve in his state of the union address that pumped up the price of oil and oil companies’ upstream profits. Now comes the downstream profit-taking. How long will it take Congress to figure out that with $3 per gallon gasoline in March, the pumps will register $4 per gallon by summer without the government putting its foot down? Or does it know and just doesn’t care?