From BlackAmericaWeb.com

In recent weeks, prices at the pump have hit an all-time high. The average price for a gallon of gas in the United States is currently $3.036, just two cents short of the record high reached in September 2005 after Hurricanes Katrina and Rita hit the Gulf Coast.

Paradoxically, this year, rising gas prices are not being driven by increases in the cost of oil. In fact, a barrel of oil is actually $7 cheaper than it was this time last year. How is it possible for gas prices to reach record highs while the price of oil remains relatively stable?

We examined this and related questions during a House Judiciary Committee Antitrust Task Force hearing titled, “Prices at the Pump: Market Failure and the Oil Industry.” We found that America’s pain at the pump has three possible causes:

Cartels. OPEC accounts for two-thirds of the world’s oil reserves and over 40 percent of the world’s oil production. Most significantly, OPEC’s oil exports represent about 70 percent of the oil traded internationally. This affords them considerable control over the global market. Its net oil export revenues should reach nearly $395 billion this year, and its influence on the oil market is dominant, especially when it decides to reduce or increase its levels of production. For years, the OPEC Cartel has purposefully driven up the cost of imported crude oil to satisfy the greed of its members. We have long decried OPEC, but, sadly, no one in government has yet tried to take any action.

Lack of Production. Another potential cause of high gasoline prices is the fact that the Big Oil companies have not increased production in the past five years. And let’s be clear — it is not because they cannot afford to make these investments. Oil companies today are enjoying record profits, and while they could use those profits to invest in more production capacity, instead they use the money to buy back shares in the market.
As Mark Cooper testified during the hearing, “Supply has become a strategic variable in U.S. oil markets, subject to the control of a handful of companies. The domestic oil oligopoly has systematically under-invested in refining capacity.” So we are left with a shortage of refineries and not enough capacity to store reserves. There are so few refineries that the existing ones are using 95 percent of their total capacity, and they are making a lot of money. Last year, refiners’ profits jumped 39 percent, to $24 billion. In California, gasoline prices have risen 48 percent since the end of last year. Without access to new reserves, consumers will continue to feel the squeeze at the pump.

Consolidation. The final potential cause is the consolidation of the industry. In 1993, the five biggest refiners in the U.S. controlled 35 percent of the market. By 2004, they controlled 56 percent. In some regions of the country, a few refineries have an oligopoly on the market. In fact, a Senate report in 2002 reported “tight oligopolies” operating in 28 states. With this type of market structure, each individual refinery can limit capacity and drive up prices.
In this type of marketplace, with these stakes, we need an administration that is going to have an active, vigorous merger enforcement policy. As reiterated by the Honorable Richard Blumenthal at the panel, the “Federal government’s lax and lackluster enforcement of anti-trust laws has led to … more and more market power concentrated in fewer and fewer hands.”

In response to these findings, last week I introduced a bill that would address America’s skyrocketing gas prices — The No Oil Producing and Exporting Cartels Act of 2007, or NOPEC. I was joined by bipartisan cosponsors, Reps. Zoe Lofgren and Steve Chabot. NOPEC will make participation by foreign governments in oil cartels engaging in conduct designed to fix the price of oil illegal under U.S. law. Under the bill, OPEC nations will no longer be able to hide behind the dubious doctrines of sovereign immunity and act of state, policies that originated to accord proper respect among nations for each other’s core governmental decision-making. These doctrines have no place in shielding state profit-making enterprises from accountability for anti-competitive marketplace conduct that, when engaged in by private enterprises, subjects the wrongdoers to heavy fines and time in prison. The bill makes clear that foreign governments are persons under our antitrust laws, and subject to suit, and specifically authorizes the Department of Justice to bring lawsuits in federal court against oil cartel members.

We don’t have to continue to stand by and watch OPEC dictate the price of our gasoline without any penalty or recourse. By passing this bill, we can put our antitrust laws to work against OPEC, just as we would against any other cartel that is fleecing American consumers of their hard-earned money.