Everyone is looking for someone to blame for higher gas prices, but one of the favorite media targets has been oil companies that dare to turn a profit.
Anthony Mason, on CBS’s May 22 “Early Show,” led off with senators on the Senate Judiciary Committee reacting to the price of gas. Executives from the five major oil companies appeared on May 21 before the committee [1].
“With gas prices breaking records every day, oil-company executives were called on the carpet on Capitol Hill,” Mason said.
However, Mason’s segment didn’t include any mention of the more rational view on Capitol Hill – those in the Senate that aren’t blaming oil companies for high prices. One senator, Herbert Kohl (D-Wisc.) was featured in the CBS segment expressing his outrage over the high prices.
“Your profits are going up hugely. It doesn’t seem fair, guys. It just doesn’t seem fair,” Kohl said.
Mason even trumpeted Chevron’s (NYSE:CVX [2]) $18 billion profit last year, but one senator doesn’t blame oil executives. He also used some fuzzy math in a claim that gas prices, currently at $3.83 a gallon according to AAA’s Fuelgaugereport.com, would nearly double if the price of a barrel of oil went to $200.
“Crude cracked $133 in the trading pits Wednesday,” Mason said. “Oil prices are still so hot that one analyst has even forecast that crude could reach $200 a barrel within two years. Two-hundred-dollar oil would push the price at the pump to more than $7 a gallon.”
In other words, Mason claims a 50 percent increase would cause prices to increase in excess of 83 percent.
Contrary to Mason’s report, there are leaders on Capitol Hill not willing to put all the blame on the oil companies. Sen. Judd Gregg (R-N.H.), ranking member on the U.S. Senate Budget Committee, appeared on CNBC’s May 22 “Squawk Box” to discuss the issue of high gas prices and oil.
“[S]ure the oil executives … they don’t have the oil,” Gregg said. “We have the oil here in the
Instead, Gregg blamed the senators doing the grilling.
“[W]hen I was listening to that committee hearing yesterday, I was thinking, you know – the real problem here is the guys sitting behind the rostrum asking these questions who are barring us from getting to these oil reserves that we have here in the
Tom Kloza, of Oil Information Price Service, also appeared on the May 22 “Early Show,” immediately following Mason’s segment. He explained to anchor Harry Smith that the price has more to do with market pressures.
“Well, this year, unlike some of the previous years where we tried to use the explanation of crude, this year it really is about the crude,” Kloza said. “And something like 70-75 percent of the increase or of the price of gasoline is really wrapped up in the price of crude. Just for the raw barrels coming out of the ground, if you quoted it in gallons, you’re probably about $3.25 a gallon.”
Kloza broke down the rest of the cost – attributing the remaining portion to taxes, marketing and retail.
“You add 45 cents in taxes on to that nationally, on average,” Kloza said. “A dime, 15 cents for marketing and retail, and really the big huge amount is in the crude side. So if you’ve got crude oil underground, you’re making a lot of money.”
Kloza attributed some of the blame to speculating in the oil markets causing prices to react and add to an oil bubble, but he didn’t think the bubble would “burst.”
“[I] don’t think we’ll go back to the numbers between $20 and $60 that we saw before,” Kloza said. “And I don’t think it will burst. I do think that it will come off substantially. You know, we’re lucky in that we’re in the historical period of time now where 23 of the 26 last years we peaked on gasoline prices before May 26. So, we may get a break. The problem is I think we’ll get more vapor pressure inside that bubble when we get into the latter stages of the hurricane season.”