refinery profit margins go from $17 per barrel to $39; refineries run at 92% capacity vs. 76% years ago, creating price spikes

House committee asks oil firm CEOs to explain why gas might soon cost $4 per gallon
RAW STORY
Published: Wednesday April 11, 2007
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Rep. Dennis Kucinich (D-OH), chairman of the Domestic Policy Subcommittee, has sent a letter to the CEOs of seven major oil companies demanding to know why gas prices could soon climb to $4 a gallon.

Kucinich, whose committee oversees the Department of Energy, is asking top oil executives what role their companies play in the record high prices of gasoline.

"We seek to learn how the realities of decreasing refinery capacity, decreasing gasoline inventories, rising oil company profitability and increasing market concentration in the oil industry may be the root cause of new record-high gasoline prices," Kucinich said in a statement.
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News reports have indicated that refinery profit margins on the West Coast have increased substantially, from an average of $17 per barrel over the past five years to $39 per barrel currently.

The number of refineries in California has fallen by more than half since the early 1980s, but more important, the remaining refineries have not increased supply capacity to keep pace with consumer demand. West Coast refineries ran at about 76% of capacity in 1985. Outages at one refinery were easily compensated for by increased production at other refineries. Now, West Coast refineries are running at nearly 92% of capacity, leaving little room even for maintenance without spiking prices due to lack of supply. Current inventory supplies may have fallen to only 17 days. That is below the very low level of inventory supply reached in May of 2006, when the state's gasoline prices hit a new record of $3.38 per gallon. At that time, California had about 18 days of gasoline supply on hand, well below the national average at that time.

The oil industry has experienced increasing concentration of market share in the past two decades. In 2006, the three largest refiners controlled about 50% of the state's market, with the top seven controlling 81 percent. Chevron alone controls 25% of the state's refining capacity. ...