WASHINGTON -- Secretary of Energy Samuel Bodman said that the Bush administration sees no direct evidence of profiteering by big U.S. oil companies and is doing all it can to tame near-record prices, according to Reuters.
Asked on NBC's Meet the Press on Sunday whether oil companies are exploiting consumers, Bodman said, We see no evidence of it, but this is one of those situations where I guess I would call it trust but verify'.
He added, This administration is doing everything it can do.
Citing Exxon [image-nocss] Mobil Corp.'s record profits and former CEO Lee Raymond's $400 million retirement package, some Democrats and at least one Republican, Pennsylvania Senator Arlen Specter, have said the government should tax windfall industry profits. Bodman said such a tax is a bad idea because it could spur the industry to produce less oil to avoid paying, which happened when such taxes were last enacted in the 1970s.
That was tried 30 years agoit did not work, he said. That proposal does not hold water.
Meanwhile, the National Association of Convenience Stores (NACS) urged Congress to avoid enacting hasty policies and to use caution when considering new proposals for which the effects on the market and the American consumers may not yet be fully understood.
Our industry understands and shares consumer frustration with escalating gasoline prices, wrote NACS President and CEO Henry O. Armour in the letter that was distributed to congressional offices Friday. As you face pressures to do something' to address high gasoline prices, I write to offer our assistance in your efforts to better understand the retail gasoline marketplace.
He added, Even though our industry is severely and negatively affected by rising gasoline prices, we caution Congress against enacting hasty policies without fully investigating the affect such action may have on the market. These policies can further disrupt the market, prolonging the negative affects of supply and demand imbalances and extending the economic hardship experienced by American drivers and retailers.
Armour said that NACS is prepared to assist members of Congress to develop policies that promote a more stable environment for retailers and consumers in the long term and will cooperate to the fullest extent possible to provide relevant information to help Congress better understand what is occurring in the retail gasoline business.
Despite canopies that promote a specific brand of gasoline, very few of the country's convenience storesfewer than 3%--are owned and operated by one of the integrated major oil companies. It is much more likely that the business is owned by an independent entrepreneur who lives in the community and simply entered into a supply contract with a refiner, similar to what some restaurants do with regards to the brand of soft drink they sell, said Armour.
Most Americans also are not aware of the profits derived at the retail level, said Armour. He said that in 2005, motor fuels sales accounted for more than two-thirds of the convenience store industry's sales dollars (69.4%), but only slightly more than one-third (35.5%) of the industry's gross margin dollars. This exemplifies the reality of motor fuels retailing today: gasoline may drive customer traffic to a store, but it does not drive profits. The fact is, on average, approximately 90% of the retail price of gasoline is determined before it leaves the refinery, said Armour. He noted that when prices rise, retailer margins typically fall, and that has been the case over the past month as already slim retail margins dropped more than per cents per gallon, resulting in a growing number of retailers losing money on every gallon they sold.
He concluded, Congress should take the appropriate time to conduct oversight hearings of marketplace activities and legislative proposals. Congress must collect relevant economic data to understand current conditions and the potential affect of policy proposals. Only through such a responsible process can Congress develop strategies that will benefit consumers in the long term.
But around the nation, state politicians continue to call for swift and sometimes ill-conceived action on gasoline prices. Here are a few examples:
Texas
Some 72% of respondents to a Beeville Bee-Picayune survey asking whether they planned to take part in a Beeville, Texas-sponsored boycott of Exxon Mobil Corp. announced last week, reported AP.
Opponents of the boycott, which was slated to start yesterday, said that oil and gasoline taxes fund much of Bee County's budget, and they say a boycott could end up harming mom-and-pop gas stations whose main profits are not from oil.
The boycott against the world's largest oil company will continue until gas is down to $1.30 a gallon, said County Judge Jimmy Martinez, the county's highest elected official. A gallon of regular unleaded cost $2.92 on average around the nation and $2.80 in the Corpus Christi region Sunday, according to AAA.
Fuel is the lowest-profit item at the town's three Exxon stations, owner Leticia Munoz said, adding that her 51 employees fear for their jobs. They realize if it affects us, it'll affect them, said Munoz, whose profits come mainly from sales of tacos, sodas and other store items. She said she had gotten a few customers who wanted to show disapproval of the resolution by buying Exxon gasoline
Martinez urged citizens to boycott only gasoline not the convenience stores.
Florida
Florida Attorney General Charlie Crist said rising gasoline prices have prompted his office to open an investigation into whether major oil companies are violating federal monopoly laws. We have called the major oil companies and asked them to come to Tallahassee next week to ask them why [current prices] are not a violation of the Clayton Antitrust Act, he said, according to The Tallahassee Democrat. The 1914 act bars companies from controlling enough of a commodity to effectively control the market for it. Crist, who is seeking the Republican gubernatorial nomination, said the mergers that created ExxonMobil, ConocoPhillips, Chevron Texaco, BP-Amoco and Royal Dutch Shell have taken free enterprise and normal supply and demand forces out of the petroleum marketplace.
Meanwhile, through its website, http://www.lowermygasprices.org, the Coalition for Lower Gas Prices, a Florida nonprofit corporation founded by Wal-Mart and Murphy USA, is pushing for the repeal of a portion of The Florida Motor Fuel Marketing Practices Act, which it calls an anti-consumer law that unnecessarily prevents gas stations from selling gasoline below a required minimum markup. It said, If repealed, Floridians will see lower prices at the pumps, thereby improving the state's growing economy and facilitating a competitive marketplace.
Wisconsin
Officials in Wisconsin would have the power to investigate and prosecute gouging under a pair of bills moving through the state legislature, AP said. The state has no anti-gouging laws, only those prohibiting changing prices more than once a day and charging people in line a new price posted while they are waiting. One measure (SB 358), authored by State Senator Neal Kedzie (R), would prohibit selling goods and services, including gasoline, at excessive prices during an emergency declared by the governor. The state Department of Agriculture, Trade & Consumer Protection would draft formulas to determine when prices become unreasonable and would issue warnings, and could file lawsuits seeking up to $10,000 in forfeitures and an injunction.
The other measure (AB 786), crafted at the request of Democratic Attorney General Peg Lautenschlager, would permit the AG to investigate and prosecute retailers posting gasoline prices that grossly exceed the average price from the previous year. The bill doesn't define grossly exceed, instead leaving it up to the AG's discretion to launch a probe.
And Wisconsin Governor Jim Doyle launched a joint petition with the state of Michigan that urges the president and Congress to cap the excessive profits of oil companies. Doyle also urged them to repeal $10 billion in taxpayer subsidies to oil and gas companies. He urged people to sign a petition at www.lowergasprices.wi.gov.
New York
New York should cut the gasoline sales tax and use some of the remaining proceeds from the levy to invest in alternative-energy projects, state Assembly Republicans proposed, said the Press & Sun-Bulletin. They claim that the state is getting a windfall from high gasoline prices, since the sales tax, typically 8% or more, is charged on the entire bill. So as the price goes up, so do the receipts from the sales tax.
The plan, which has already been approved by the GOP-controlled Senate but rebuffed by the Democratic majority in the Assembly, would cap the price on which sales tax is charged at $2 a gallon. At the current price, the plan would save motorists between eight and nine cents a gallon. The savings would increase as the price goes up.
The Republicans said New Yorkers are paying 65 cents in taxes per gallon of gasoline, the highest figure in any state. The sales tax is levied on top of all the othersa tax on a tax, as Assemblyman Dan Burling (R), put it. But it is already too late, Governor George Pataki and Assembly Democrats said. Pataki said action on the spending plan has been finished, so the state cannot now change the tax structure.
Assembly Energy Committee chairman Paul Tonko (D) added that the measure would put pressure on counties to roll back their sales taxes on gasoline, too, which he said amounts to an unfounded mandate. Tonko said the state should put pressure on the federal government and the oil companies to get gasoline prices down.
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