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World Biofuels Symposium
November 13-15, 2005
Beijing, China

2nd Annual Canadian Renewable Fuels Summit
December 13-15, 2005
Toronto, Ontario, Canada
Hosted by:
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National Biodiesel Conference & Expo 2006
February 5-8, 200
6
San Diego, California
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11th Annual National Ethanol Conference: "Policy & Marketing"
February 20-22, 200
6
Las Vegas, Nevada, USA
Sponsored by:
Renewable Fuels Association

22nd Annual International Fuel Ethanol Workshop & Expo
June 20-23, 200
6
Milwaukee, Wisconsin, USA


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Posted on  

May 8, 2002

Oil firms tighten supply

By Carl Levin

To see whether spring is just around the corner, the groundhog nowadays looks not only for his shadow, but for spikes in gasoline prices as well. And what he sees may give him sticker shock. A dime increase in the price of gasoline shifts $10 billion from the consumers to the pockets of the oil industry.

According to Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites), price spikes can ''undermine both the real purchasing power and the confidence of consumers'' and push the economy toward recession.

How can we avoid these spikes? The staff report I released last week shows that as fewer companies have gained more control of this nation's refineries, these companies can limit the supply of gasoline in order to charge higher prices.

When supplies of gasoline are ''tight'' and inventories are low, two things can happen:

* Oil companies can spike prices before holidays without fear of competition driving them back down.

* Any disruption -- such as a refinery outage or pipeline break -- will lead to a shortage and a spike in the price.

Recent mega-mergers (news - web sites) have put together big chunks of the Standard Oil trust that was broken apart nearly a century ago.

In California, six companies control about 90% of the gasoline produced and sold, and profits from refining are high.

Our investigation found that in order to limit gasoline supplies, oil companies in California sought to block shipments of gasoline into the state, export gasoline from the state and prevent a refinery from operating.

In the Midwest, which is becoming highly concentrated, too, at least one company considered the same tactics.

Just before Labor Day last summer, prices in the Midwest spiked by almost 40 cents. One cause of this spike was the decision of a few refiners to reduce gasoline production, even in the peak demand season, in order to boost prices. Unique fuel specifications were not an issue.

As long as concentration in the refining industry continues to increase, Americans can expect price spikes to occur regularly and to be another reason for the groundhog to scurry back into his hole.

 

 

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