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FOR IMMEDIATE RELEASE: May 31, 2011

SCHUMER DEMANDS IMMEDIATE INVESTIGATION INTO PRICE FIXING BY U.S. OIL REFINERS – PRACTICE COULD BE KEEPING GAS PRICES AT THE PUMP FROM COMING DOWN FASTER IN BUFFALO


Recent Reports Indicate That U.S. Refiners Are Cutting Back On Gasoline Stockpiles To Keep Prices High And Pad Their Bottom Line – Despite Big Drop In Crude, Buffalo Prices Have Been Slow To Fall

In The Wake Of Indictments Of Speculators From 2008 Oil Manipulation Effort, Schumer Calls For Immediate Investigation Into Potential Price Fixing That Could Be Keeping Prices Near Record Levels In Western NY

Schumer: Refiners’ Decision To Cut Back On Supply Could Be Draining Western New Yorkers’ Bank Accounts

Today, U.S. Senator Charles E. Schumer announced that he and his colleagues are demanding that the Federal Trade Commission (FTC) begin an immediate investigation into U.S. oil refiners who may be responsible for continued high gas prices. New reports suggest that refiners are cutting back on gasoline stockpiles in an effort to decrease supply and inflate the price of gas at the pump. The Energy Information Administration just released data showing that refiners are operating at just over 80% of their capacity, which translates to a decrease of 900,000 barrels per day when compared to 2010 output levels. Since last year, refiners’ profits have more than doubled. While crude oil prices have come down in recent weeks, the average price of gasoline has just barely dropped to below $4 a gallon in Buffalo. Schumer notes that gas prices skyrocket up right alongside the price of crude oil, but the decrease in oil prices has not translated into substantial drops in the price at the pump.

“At a time when major refiners and oil companies are making record profits and New York families continue to struggle with gasoline at record prices, the idea that refiners may be manipulating the market to keep prices artificially high is offensive,” said Schumer. “When the price of oil goes up, gas shoots up like a rocket – but when it goes down, the price of gas seems to fall like a feather. That’s just not right. As the price of crude oil and the use of gasoline decline, there are clear signs that refiners may be stockpiling oil, which keeps prices high. I urge the FTC to immediately investigate and ensure that New Yorkers are not being victimized by this type of manipulation.”

Recent reports have suggested that U.S. refiners are cutting back on U.S. gasoline stockpiles in order to artificially keep prices high and inflate their bottom line.  According to new data released by the Energy Information Administration, U.S. oil refiners are producing at just 81 percent of their capacity—a drop of 900,000 barrels per day compared to last year’s output. The refiners’ profit margins have more than doubled over that same span, and refining margins have experienced an increase of over 90 percent since January 2011.

Schumer pointed out that just this past week the Commodities Futures Trading Commission (CFTC) launched an investigation into several individuals and companies over an oil price manipulation effort from 2008 that worked to give the impression of tight supplies in order to boost oil prices and generated profits of $50 million.

Schumer notes that even in Buffalo, the cost of gas is still unacceptably high, just under $4.00 per gallon. The Buffalo average has been dropping slowly since hitting a peak around $4.07 on May 6, but big decreases in crude oil and wholesale gasoline prices over the same period have not found their way to gas pumps. Schumer states that this is unacceptable and a direct affront to the American people who are still struggling with the economic downturn.

Schumer and his colleagues raised concerns that the price of oil is clearly a driving factor behind the recent rise in gasoline prices, but as gasoline use is declining, U.S. gasoline inventories remain below average and refining margins continue to rise. U.S. refiners are using only 81.7 percent of their capacity, a decline of 7 percent from the same time last year.  Moreover, since the beginning of 2011 U.S. refiners have seen over a ninety percent increase in their refining margins. While some have argued that this increase is due to potential impacts from recent flooding along the Mississippi River, this cannot justify the steady increases in their margins since January of this year.

For refineries, their margin is the difference between what they pay for crude oil and what they get for the wholesale gasoline and other products. Those margins have been gradually rising this year and recently were more than double what they were a year ago, when they were 38 cents for a gallon of gasoline. Since January 2011, the refining margins have increased over 90%. Refineries are also exporting more gasoline, especially to Mexico and Latin America. The most recent data shows that in February, the U.S. exported 400,000 barrels of gasoline a day, or about 5 percent of U.S. demand. U.S. exports are at their highest levels since the information started being collected in 1945.

This data shows that while crude oil stockpiles are above average, and oil prices have come down recently, U.S. gasoline inventories remain below average. Schumer states that this could help keep pump prices from fully reflecting the recent decline in crude oil.

In their letter to the Federal Trade Commission, Schumer and his colleagues stated that, “At a time when major refiners and oil companies are making record profits and American families continue to struggle with gasoline at record prices, the idea that refiners may be manipulating the market to keep prices artificially high is offensive.  It is incumbent upon the Commission to ensure that the American people are protected from this type of manipulation.”

The full text of the letter, co-signed by Senators Harry Reid, Dick Durbin, Patty Murray, and Claire McCaskill is below:

Jon Leibowitz, Chairman

Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, D.C. 20580

Dear Chairman Leibowitz:

We write today to request the Commission begin an investigation into potential price fixing of gasoline by U.S. refiners.  Recent reports have indicated that U.S. refiners are cutting back on U.S. gasoline stockpiles in order to artificially keep prices high and inflate their bottom line.  If true, this behavior is a direct affront to the American people who are still struggling with the economic downturn.  It is currently within the Federal Trade Commission’s (Commission) authority to review these allegations for any potential wrongdoing and to determine the impact these actions may have on gasoline prices both regionally and throughout the country.           

The rise in the price of oil is certainly a driving factor behind the recent rise in gasoline prices, but concerns have been raised that while gasoline use is declining, U.S. gasoline inventories remain below average and refining margins continue to rise.  According to information posted by the Energy Information Administration U.S. refiners are using only 81.7 percent of their capacity, a decline of 7 percent from the same time last year.  Moreover, since the beginning of 2011 U.S. refiners have seen over a ninety percent increase in their refining margins. While some have argued that this increase is due to potential impacts from recent flooding along the Mississippi River, this cannot justify the steady increases in their margins since January of this year.           

At a time when major refiners and oil companies are making record profits and American families continue to struggle with gasoline at record prices, the idea that refiners may be manipulating the market to keep prices artificially high is offensive.  It is incumbent upon the Commission to ensure that the American people are protected from this type of manipulation.  Accordingly, we request that the Commission open a full investigation into these allegations of wrongdoing and to determine the impact this behavior, if confirmed, has on regional and national gasoline prices.

Thank you for your consideration of our request.  We look forward to hearing from you. 

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