As the average price for unleaded regular gasoline in Sacramento soared to $3.22 per gallon this week, the Federal Trade Commission (FTC) reported that it can find no evidence that the oil industry is reaping record profits by illegally manipulating the supply of gasoline in the wake of Hurricane Katrina. The FTC’s congressionally mandated investigation found “no evidence to suggest that refiners manipulated prices through any means, including running their refineries below full productive capacity to restrict supply, altering their refinery output to produce less gasoline, or diverting gasoline from markets in the United States to less lucrative foreign markets.”
However, there’s a simple reason the FTC didn’t find any manipulation, according to Ann Wright, a policy analyst for Washington, D.C.-based Consumers Union.
“The FTC’s ‘price gouging’ investigation failed to expose one of the single largest factors influencing oil and gas prices today: the lack of competition,” she said. “Consolidation within the industry over the past decade has eroded downward pressure on gas prices. The result is that consumers are trapped between a handful of powerful oil companies controlling prices and a government that won’t take meaningful action.”
Indeed, as Consumers Union reported earlier this month, industry consolidation has reduced the number of major oil companies from 11 to four during the past decade. Not coincidentally, oil companies have since registered $100 billion in windfall profits while steadily rising gasoline and fuel oil prices have added $1,000 to the average family’s energy bill. Yet, the industry continues to deny that the lack of competition is leading to excessive profits.
“It’s understandable for people to wonder if oil company earnings are excessive, especially in times when pump prices have been rising,” the Western States Petroleum Association recently responded. “In fact, according to published reports, oil and gas industry earnings for the 4th quarter of 2005 were not much higher than those of other U.S. industries, on average, and were significantly lower than those of businesses like pharmaceuticals and software.”
But Mark Cooper, director of research for Consumers Union, said the industry is comparing apples and oranges.
“Comparing their annual reports to their PR campaigns, we found that the industry tries to mislead the public and policymakers by telling very different stories on Wall Street and Main Street,” Cooper said. “On Wall Street, they point to their soaring return on equity and cash flow as proof of their huge profitability, while on Main Street they point to profit as a percentage of sales and ignore cash flow to claim less than stellar results.”—R.V. Scheide
Bubba get the GOAT
At the Hangtown Motocross Classic on Sunday, May 21, James “Bubba” Stewart and Ricky Carmichael started the outdoor motocross season exactly where they left off the recently completed supercross season: battling tooth and claw for dirt-bike supremacy. (See “Motopsycho!” SN&R Feature Story, May 11.)
Outdoors, two races called motos are held, with the rider getting the best combined score in both declared the overall winner. Coming into Hangtown, which is held at the Prairie City off-highway-vehicle park 20 miles east of Sacramento, Carmichael had won 27 overalls in a row over the past three seasons. The Makita Suzuki rider is called the Greatest Of All Time, but this time Bubba got the GOAT, breaking Carmichael’s record-winning streak.
Carmichael got the jump on the field in the first moto, only to fall in the first corner and restart in dead last place. He valiantly fought to third place by the race’s end. Meanwhile, Stewart stalked race-long leader Chad Reed, passing the hapless Yamaha rider for the win on the last lap.
Carmichael got the holeshot in the second moto and kept it up on two wheels, taking an easy victory by some 40 seconds. Stewart’s Kawasaki followed in second, and Bubba was awarded the overall victory based on his better combined score (1-2 vs. 3-1). Rising KTM star Mike Alessi won both motos in the smaller lites class.—R.V. Scheide