Monday July 2, 6:59 pm Eastern Time
Report Details Gas Price Increases
Report Blames Gas Price Increases on Higher Consumption, Lack of Competition in Oil Industry
biz.yahoo.com
By JENNIFER LOVEN
Associated Press Writer
WASHINGTON (AP) -- Even as gas prices come down, they are stabilizing at about 20 cents per gallon more than motorists paid in the late 1990s, a new report from the Consumer Federation of America found.
The primary cause is not an increase in the price of foreign crude oil, the group said Monday. Instead, the report blames higher gas consumption, the result of motorists driving more and choosing gas-guzzling sport utility vehicles. It also faults the inadequate capacity and relative lack of competition in the domestic oil industry.
The CFA report said oil companies closed 10 percent of the nation's refineries between 1994 and 1999, while the capacity to store gasoline stocks fell 15 percent. Reserves have been slashed to typically no more than a day or two of supplies, the report said. The result is a vulnerable market, where any disruption can trigger price spikes, the report said. ``The price spiral occurs because suppliers who face weak competition find they can take unilateral actions in tight markets to quickly increase prices and profits and stabilize them at higher levels,'' the report said. ``Some of this is not illegal, it's just immoral,'' said Mark Cooper, the report's author.
Rayola Dougher, a senior policy analyst with the American Petroleum Institute, which represents major oil companies, said the CFA is wrong on all counts. Oil industry mergers have brought down expenses, she said. Dougher denied that gas companies deliberately prolong price run-ups or shut down refineries in order to drive up profits. ``There was no plot out there,'' Dougher said.
The CFA said the Bush administration's national energy plan, which focuses on increasing domestic production through oil and gas drilling on federal lands and streamlining the process of opening new refineries, is not comprehensive enough to prevent future gas price problems.
But Energy Department spokeswoman Jeanne Lopatto said the administration proposal is critical to protecting the nation from cyclical price spikes. ``If the Consumer Federation had read the national energy policy, they would see that it is a balanced, comprehensive proposal that balances the need for increased supplies of energy with the need to modernize our conservation efforts,'' Lopatto said. ``We do have a diversity in there in terms of our fuel supplies.'' |
