The People of America's Oil and Natural Gas Indusry

Energy Policy Diversion

Mark Green

Mark Green
Posted May 19, 2011

Suggesting that because gasoline prices have been rising, something sinister is afoot certainly will grab headlines in Washington. So it's not out of line to wonder if there's some grandstanding in two senators' letter to the Federal Trade Commission, asking for a review of refinery capacity and allegations of market manipulation. Yes, says API's chief economist.

"The notion that there's a conspiracy is absurd," says John Felmy of the request from Sens. Claire McCaskill, D-Mo., and Chuck Schumer, D-N.Y. "This is an attempt to distract attention from failed energy policy. The Federal Trade Commission was already closely monitoring gasoline prices, and no evidence has surfaced to suggest supply and demand aren't the primary forces driving them."

Here's the key issue in the senators' letter: their suggestion that because refiners' margins have increased this year something's amiss. Felmy says refiners lost money in the last quarter of 2010 and made just one-half cent on a dollar sale of gasoline in this year's first quarter. You'll get a distorted view if you compare current margins with January's. "The margins have gone up 90 percent from a profit rate at the beginning of the year, but that's from practically zero," Felmy says. "The whole Washington experience is political spin and selective statistics."

The fact is refiners are producing record amounts of gasoline, he says, but world and U.S. demand are increasing. The price of crude oil is the chief driver of gasoline prices, but they're also affected by local issues, such as Mississippi River flooding.

"Press releases that call for yet more investigations of prices insult consumers," Felmy says. "We need to be producing more oil and producing more of it at home. Our companies are working hard to do that, but they need the government's cooperation. Policymakers concerned about gasoline prices need to change their focus."

He's talking about increased access to American oil resources. In the past two weeks the House of Representatives has passed three bills to boost drilling in the Gulf of Mexico and other locations. Bills like these are the right responses to our energy and economic challenges for today and well into the future. But it will be hard to move the debate forward on domestic energy production while continuing to attack the energy companies and refiners who make it happen.

Additional resources:

Fuel Prices Fact Sheet

Why are Gas Prices Rising? - In Brief


Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.