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Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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Why U.S. Energy Independence Means Pump Pain

A U.S. lawmaker said he was frustrated that embattled British energy company BP was posting better-than-expected fourth quarter profits while most Americans were paying top dollar for gasoline prices. A series of refinery issues, coupled with higher oil prices, resulted in a seasonal spike in gasoline prices. Motor group AAA reports that some regional markets started February by paying the highest they've ever paid for a gallon of regular unleaded gasoline for the month. Historically, U.S. lawmakers start pressing for emergency relief once prices march toward $4 per gallon. A university report this week states that new vehicles are setting records in terms of gas mileage, but shifts in the U.S. oil market could mean that might not be enough to allay consumer concerns.

U.S. Rep. Ed Markey, ranking member of the House Natural Resources Committee, said he wanted lawmakers to repeal what he said amounted to a $7 billion tax break for energy companies.

"I will soon be introducing legislation that will end Big Oil’s subsidies," he said in a statement. "As Congress works to address the numerous fiscal challenges facing our nation, it is time for Republicans in Congress to join me to end Big Oil’s subsidies, which is a common sense deficit reduction measure available right now."

Related article: 2013: Cheapest Gas in 4 Years?

At the same time that BP was beating analyst's expectations, motor group AAA said American consumers in February paid more for gasoline than what's typical for this time of year. A decision by Hess Corp. to close a New Jersey refinery, followed by a fire that closed the Toledo refinery for PBF Energy, helped push gasoline prices higher in the United States. Crude oil prices above $100 per barrel, meanwhile, added to consumer woes. AAA said that, by Wednesday, U.S. consumers paid, on average, $3.54 for a gallon of regular unleaded, up 25 cents compared with one month ago, and far above the "Christmas Miracle" of $3 gas.

When Iran last year threatened to close the Strait of Hormuz, a key oil-shipping lane, lawmakers pressed for a release from the Strategic Petroleum Reserve as retail gasoline prices shot above $4 per gallon. Clamoring over the SPR coincided with Hurricane Isaac's landfall last year, but by the time Sandy hit in October, there were few calls for a release despite east coast gasoline rationing.

Markey's opponents, like Rep. Fred Upton, R-Mich., chairman of the House Energy and Commerce Committee, say some relief could come through North American energy independence initiatives like the Keystone XL pipeline planned for Alberta oil sands.

Related article: Don't Believe the Gasoline Hype

"This pipeline is clearly in our national interest and it is critical for our economy and our national security that it be approved immediately," he said in a statement.

A report from the Natural Resources Defense Council found that Keystone XL would take crude away from Midwest refineries that produce gasoline to southern U.S. refineries designated for exports, however. That, says the NRDC, means gasoline prices are likely to go even higher if the pipeline is built. No SPR release could avert that increase. To no surprise, pipeline developer TransCanada disputed the NRDC's claims.

A report published Tuesday by the University of Michigan finds that new cars and trucks sold to U.S. consumers in January posted a record 24.5 miles per gallon.  President Barack Obama wants much more than that by 2025, calling for an average of 54.5 mpg by then. With AAA warning that U.S. adjustments to Canadian crude oil may indeed spur higher gasoline prices, that sort of mpg ambition might be needed sooner to keep budget-wary Americans at ease.

By. Daniel J. Graeber of Oilprice.com




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Leave a comment
  • John Livingston on February 08 2013 said:
    Some of the stupidest arguments I hear are for the justification of high oil prices and seems like the one I am hearing now which is a lie, is that if we get the canadian oil that will just drive the prices higher, so more supply in a world of lessening demand wouldn't cause a price decrease, I guess that will push the electtric car to the forefront in the very near future. american business has a history of underestimating the consumer.

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