The petroleum industry continued to defend itself in the second quarter of 2006 against growing public ire about rising fuel costs. In particular, industry groups stepped up their efforts to calm and educate angry consumers and jittery legislators trying to respond to outrage about the cost of filling up at the gas pumps.

“Oil companies do not set the price of crude oil,” Red Cavaney, president and CEO of the American Petroleum Institute (API), wrote to members of Congress on April 24. “Crude oil is bought and sold in international markets, and the price of a barrel of crude oil reflects the market conditions of the day. Strong growth in worldwide demand, in the face of diminished excess supply capacity and together with increased supply uncertainty, has pushed prices upward.”

API also released a brief report, Understanding Today's Crude Oil and Product Markets, that, among other goals, sought to address perceptions that being a company in the energy industry today essentially amounts to a license to print money.

In the table from the report reproduced below, for example, API said it was trying to demonstrate that “the trend in profitability has, until the past few years, been consistently moving downward.” API said this was “driven in large part by the long-term decline in economic returns realized by the U.S. domestic refining sector.”

Although such trends may be true, industry representatives nevertheless found themselves repeatedly reacting to efforts in Washington to address fuel costs. In the industry's view, some legislation was better thought-out than others.

“We are … disappointed in today's actions in the U.S. House of Representatives,” Bob Slaughter, president of the National Petrochemical & Refiners Association (NPRA), said on May 3. “The defeat of the Bass-Barton legislation, a proposal that would only streamline cumbersome and duplicative permit requirements while ensuring that environmental requirements and obligations are maintained, suggests that political considerations are more important than adoption of even very modest attempts to increase the supply of gasoline and diesel fuel available for consumers.

“On the other hand, it is extremely unfortunate that ‘anti-gouging' legislation, under the title of the ‘Federal Energy Price Protection Act of 2006,' has been approved by the U.S. House of Representatives. Allegations of refiner price-fixing, gouging or other illegal practices are patently false as repeatedly shown by FTC and other federal and state investigations. Time and time again, the commission has stated definitively that a variety of market-related factors are responsible for prices, and the practices of the refining industry have not harmed or taken advantage of consumers.”

Slaughter warned that some legislation was reminiscent of “the nation's 10-year experiment with government intervention into fuel markets during the 1970s [that] led to gasoline shortages and long lines at gas stations. That history does not suggest that price controls, including so-called price-gouging statutes, should be an acceptable template for congressional or administration action this year.”

The same week Slaughter made his comments, API drew attention to a new study from the University of Texas that found that the U.S. oil and natural gas industry spent $98 billion in the past six years on emerging energy technologies. “This study clearly refutes the claim that our companies are not putting their investments where their mouths are,” Cavaney said.  E+P