A new Congress came to Washington, D.C., a couple weeks ago to be greeted by a reported $100 million oil industry public relations offensive. The goal is to convince lawmakers gasoline prices are beyond the oil companies' control.
The oil industry should be worried. It bet more than eight out of 10 dollars in campaign cash on the political party that lost control of Capitol Hill in November.
The returning Congress need only look at the oil industry's extraordinary behavior in the run-up and aftermath of the election to see what reforms lawmakers need to tackle. With gasoline prices a top concern for American voters and American business, oil companies used their grip over the nation's refining operations to hedge their bets.
If you were oil executive and wanted to keep the Republicans in control of Congress, what could you do prior to an election?
You would keep your refineries running at full speed, flood the market with extra fuel, and take less per gallon in profit than usual.
Guess what? Department of Energy data suggest that's exactly what the oil companies did last fall.
By the second week in October, gasoline prices fell 78 cents from summer's record highs. Refineries were running full throttle and America's gasoline inventories were up nearly 7 percent from the three previous Octobers.
The rise in supply came despite BP's major pipeline disruption in Alaska. Ordinarily, that's an industry excuse to shrink supplies and raise prices.
The oil industry claimed pump prices fell because crude oil prices dropped.
But gas prices dropped far more steeply than crude oil.
Crude oil comes in barrels. There are 42 gallons in a barrel and the price of each gallon was down 10 cents this October over last. But gas prices fell 61 cents a gallon over the same time last year.
In other words, in the run-up to the election, oil companies cut gasoline prices 500 percent more than their raw material cost fell. And it wasn't because refining and distribution costs rose. They're relatively stable.
Oil companies simply took less profit from their refineries for a short period of time. Could it have been to influence a political outcome?
On Election Day, the price of gas suddenly rose after two months of sharp decline. Post-election, refineries have slowed down, inventories are shrinking, and gas prices are climbing.
It's back to business as usual, unless the new Congress starts to do business differently.
Oil companies should be prevented from artificially manipulating the gasoline supply. Anti-trust laws need to be updated to guarantee that any artificial reduction in supply to raise gasoline prices is treated as an anti-trust violation. Regardless of whether prosecutors find a smoky backroom where the price fixing decision is made. Anti-trust laws need to be modernized for the computer age. Perhaps, then, oil companies will compete to keep inventories high and prices low all year long, not just in the run-up to a key election.
Jamie Court is the president of the Foundation for Taxpayer and Consumer Rights, which is located in Santa Monica.
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