Numbers point to political gasoline price fixing
Because no one has either subpoenaed their e-mails and letters or eavesdropped on their phone calls, it’s impossible to be absolutely sure that oil companies cooperated illegally in driving down the cost of gasoline for about nine weeks before last fall’s election and then in sending it back up again gradually ever since.
This, of course, was the suspicion of many motorists as they watched the pump price for a gallon of gas drop to $2.20 or so during the weeks before the vote. Prices were back up to about $2.50 per gallon five weeks after the election, and rising steadily.
But discussions about all this are a lot like chitchat about the weather: a lot of talk with no real consequence or meaning.
But now comes a new set of information, developed by California’s most active consumer advocacy group, suggesting everything that’s happened to gasoline prices since mid-August has quite possibly been politically motivated.
Start with the historical fact that when gas prices drop before an election, the party in power usually does well. Proceed to the fact that Democrats in Congress have wanted for years to stage hearings, subpoena key records and question under oath top executives from oil companies they believe usually act as an informal cartel in setting prices. These moves all were blocked by the Republican congressional majority for the last 12 years.
Then move to the political reality of pre-election polls showing Democrats with a strong shot at wresting control from the GOP, polls which turned out to be correct.
In this very real scenario, oil companies might be tempted to try to avoid hearings and subpoenas by influencing the vote via lowered prices.
Of course, the only thing anyone knows for sure is that they did in fact lower prices considerably despite a lengthy shutdown of the Alaska oil pipeline and several refinery failures in the Gulf Coast area, events the like of which have produced supply shortages and higher prices in other years.
You end up with a picture that Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, admits is “not a smoking gun.” But, he adds, “we do see a lot of smoke.”
One form that smoke takes is a study showing that while gasoline prices have fallen during the month before each of the last three national elections, last fall’s drop was by far the most precipitous.
Even more dramatic was the drop in the difference between the cost oil companies paid per gallon of crude oil and the price per gallon of gasoline at the pump.
In October 2005, that gap amounted to $1.37 per gallon - the basic reason oil companies ended up with record profits all through the last year. But just one month before last November’s vote, the difference between pump prices and crude oil fell to 85.9 cents per gallon, a drop of more than 50 cents per gallon in oil company margins.
Combined with a reduction of 10 cents per gallon in the cost of crude, that led to a 61-cent per gallon decrease in the average price of a gallon of gasoline between October 2005 and October 2006.
Why would oil companies drop their profit margin so significantly and in such unison, only to start raising it again soon afterward?
Spokesmen for three oil companies insisted when asked that it’s all been due to market forces and the recovery of both drilling and refining capacity more than a year after Hurricane Katrina’s huge damage.
But Court is convinced it was all about a desire to manipulate votes, keep oil-company-sympathizer Republicans in charge and continue to frustrate anyone in Congress who wants to subpoena key industry documents.
“The figures developed for us by an independent oil analyst clearly show a pattern of narrowing in refining profits during the last three election years,” he said. “Last fall, we didn’t even have a downward blip in supply when the Alaska pipeline went down. That was because the oil companies wanted the ‘right’ political leadership and they wanted Proposition 87 (which would have levied a royalty on oil drilling in California) to lose. They needed to mute public anger over high gasoline prices and they did it.”
But Court has no proof, nor does anyone else. Every time state officials from the Energy Commission to the attorney general tried in recent years to investigate how gasoline prices are set, they’ve concluded they cannot prove anything is amiss because they lack legal authority to get at the key documents and other evidence.
That’s apparently the way the oil companies want to keep it, even if it means a temporary and slight reduction in their profits. Time will tell whether the Democratic takeover of Congress will change anything for them.