December 01, 2006

Dude! Where's my gas?

Turns out, it was never made...

The analysis, based on data from the U.S. Energy Information Administration, indicates that the (oil) industry slacked off supplying oil and gasoline during the prolonged price boom between early 1999 and last summer, when prices began to fall.

That's right, folks. The AP's analysis shows that the oil industry was indeed restraining supply during the most recent price spike. This dovetails nicely with what we already knew about refining capacity being squeezed through a series of mergers beginning in the late 90's. In fact, the smart folks over at the AP picked up on that as well...

Also, individual companies are freer to bottle up supplies without fear of losing business to competition, because fewer companies now control a production choke point: refining. Thanks to mergers, the top 10 companies now control three-quarters of national refining capacity, up from half in the early 1990s.

"A handful of very large companies realize it's in their mutual interest to keep prices as high as possible," says Tyson Slocum, an energy expert at the consumer group Public Citizen, founded by Ralph Nader. "I don't think they're sitting around a table smoking cigars and price fixing, but I think there are sophisticated ways to manipulate the market."

Can we now start talking about windfall taxes on oil company profits that are NOT used to expand refining and production? How about using the money generated to provide incentives to alternative energy companies for R&D as well as to increase production and build out distribution? What about helping manufacturers, (like GM, Ford and Chrysler) who have been hurt by higher energy prices, that increase fuel efficiency?

Yeah, there's a lot that can happen. Oh, and just in case you were wondering, oil is trading at $62.46 up $1.47 and still trending higher. Better gas up now!

Posted by mcblogger at December 1, 2006 03:06 PM

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