Thursday, May 24, 2007

Gas Prices

Yesterday the US House of Representatives passed a bill giving the Federal Trade Commission power to investigate the Oil company profits. President Bush's Admistration says they will veto any such bill if it passes the Senate.

The representative that introduced this bill, Bart Stupak, D-Mich., should be commended for his hard work on this issue. On his website he says this...

While consumers are being forced to pay up to $3.00 a gallon for gasoline, oil companies continue to reap record profits. Last year, Exxon Mobil posted $36 billion in profits, the largest profit for any corporation in United States history. Moreover, over the past year, refineries have increased their prices 255 percent. As these profits increase, so does the potential for price gouging.

When talking about refinery profits, economists refer to the “crack spread,” which is the price difference between a barrel of crude oil and an equal amount of refined gasoline. Typically, a crack spread of $4-5 per barrel will cover a refinery’s costs. Anything over this amount is usually profit, although this can differ from one refinery to another. If a refinery has a crack spread of $8-9 per barrel, economists consider this spread as a good, consistent profit. It has been estimated that refineries’ current crack spreads are as much as $20 to $30 per barrel. Refinery companies are raking in these excessive profits at the expense of working Americans. This is price gouging, and Congress should give the Federal Trade Commission the tools to investigate these profits and prosecute those refineries that engage in unfair practices.

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