Tuesday, April 18, 2006

Senator Charles Schumer Says High Gas Price Is Gas Companies Fault

CNN Money

New York Senator Charles Schumer, speaking in front of a Hess station in Manhattan, called Tuesday for a federal investigation to see if oil companies and refiners are deliberately withholding gasoline production, taking advantage of the normal switch from winter gas to summer gas in an attempt to bid up prices.

"The bottom line is they are producing at 85 percent capacity when they should be producing over 90 percent," said Schumer. "Are they scaling back production? Only by subpoenaing the companies and looking in their books will we get that answer."

Schumer is just pandering to the masses, my wife included, I'm sad to say. I show her the figures from their SEC filings and do the math on profits and profit margins, but she still has a hard time believing me on this issue. Of course I'm use to it, as I have to go through the same thing at work from time to time. What would really help lower gas prices and increase production is less government regulation and intervention, but that seems to be the last thing on most people's mind.

What does the FTC have to say:

A spokesman for The Federal Trade Commission, which is the agency that would look into Schumer's request, said it will take the senator's letter seriously and will respond appropriately, although the spokesman couldn't give a timeline or any other information because the agency had yet to review the letter.

However, the FTC spokesman did point out that two previous investigations into unfair business practices by the oil industry conducted in 2000 and 2001 turned up no evidence of wrongdoing.

And I doubt they will this time either.

And for the oil companies' response:

For their part, representatives for the oil industry flatly denied Schumer's suggestions.

"Prices are high, there is no incentive to hold [gas] back," said Bill Bush, a spokesman for the American Petroleum Institute. "If you have a gallon of gas, you want to get it out in this market."

Bush said refineries are only operating at 85 percent capacity because some are still recovering from last fall's hurricanes along the Gulf Coast. He added that some refineries are undergoing more maintenance than usual this spring - maintenance that was put off following the hurricanes in order to avoid taking the refineries off-line at the time.

John Felmy, the Institute's chief economist, said Schumer's call was "nothing more than political rhetoric with no basis in fact."
Spoken like a true capitalist.

posted by David at 8:57 PM :: Permalink ::