Industry asked why lower oil prices don't reach the pump
The Columbian
Published: July 16, 2013, 5:00pm
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U.S. Sen. Maria Cantwell, D-Wash.
WASHINGTON — Lawmakers grilled representatives of oil producers and refiners Tuesday seeking an explanation for a rise in prices at the gas pump amid a boom in U.S. oil production.
Senators at an Energy and Natural Resources Committee hearing complained that fuel exports and refinery shutdowns for maintenance cause regional price surges, while the head of refiner Valero Energy Corp. said local prices reflect global shifts in crude markets and blamed higher costs on the Renewable Fuel Standard, which mandates ethanol use.
“Our people want to know why the flood of new domestic crude oil isn’t lowering prices at the pump,” said Ron Wyden, D-Ore., chairman of the Senate Energy and Natural Resources Committee. “There is no question that the lower oil costs are not getting through to Americans’ wallets.”
Advances in drilling technology, including hydraulic fracturing, have revived U.S. oil production in states such as North Dakota and Texas, which reached 7.4 million barrels a day in April, a two-decade high, according to the U.S. Energy Information Administration.
Despite rising supplies, pump prices are rising. Gasoline jumped to a four-month
high. Gasoline for delivery next month rose 3.17 cents, or 1 percent, to $3.1346 a gallon at 11:57 a.m. on the New York Mercantile Exchange.
Regular gasoline at filling stations rose 14.7 cents in the past week to an average $3.639 a gallon Monday, the highest since June 10, EIA said.
In recent months, planned refinery outages or emergency shutdowns for maintenance in the West and Midwest triggered sharp increases in gasoline prices regionally, lawmakers said.
“The fact that this price spike can happen without real supply and demand disruptions is disturbing,” Sen. Maria Cantwell, D-Wash., said at the hearing.
The head of the independent EIA, Adam Sieminski, said the boom in U.S. oil production is helping to hold down global oil prices, and so is benefiting American consumers.
The argument failed to sway Wyden, who said the prospect of greater exports is a reason he is skeptical of the proposed Keystone XL pipeline, to carry Alberta, Canada, oil sands to Gulf of Mexico refineries.
While lawmakers questioned the functioning of the U.S. gasoline market, industry representatives said those prices reflect movements in international crude-oil markets.
Instead of focusing on refiners’ margins, Congress should rework the Renewable Fuel Standard, mandating the use of ethanol, because a drop in fuel use will cause the share of ethanol to exceed the 10 percent that is safe in all vehicles, said Valero Chief Executive Officer William Klesse.
Wyden pledged to have a separate hearing to examine issues with the RFS.
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