Who is to blame for the highest pump prices in five years - Big Oil, Mother Nature or Uncle Sam?
To the driving public - and a growing chorus of politicians - the popular culprits are the nation's oil companies. And the truth is that they are making a lot of money right now. But market watchers, and certainly the companies themselves, say they are not artificially running up prices and gouging consumers. Rather, they say, a host of factors in the United States and around the world have conspired to boost both crude-oil and gasoline prices."We're not going to find a smoking gun here," acknowledges Ed Rothschild, a consumer advocate with Citizen Action in Washington.
In inflation-adjusted terms, consumers are still paying less at the pump than they have in years. Says Ted Eck, chief economist for Amoco Corp.: "Gasoline is cheap. It's a bargain."
Most motorists, however, are preoccupied with the present high prices and want to know simply: What gives? The heart of the problem, according to Rothschild and others, is the just-in-time inventory philosophy now popular with U.S. petroleum refiners. Refiners began to realize last year that they could save money by waiting to buy supplies of crude oil until right before they need them. Since maintaining inventory is expensive, this tactic is "an effective way of cutting operating costs," says Ken-neth Haley, chief economist for Chevron Corp. "But it also leaves us susceptible to greater price volatility."
The very cold and long winter didn't help. It strained refiners, which had to make heating oil for more weeks than they typically do and sent them scrambling to buy the crude they needed to start making gasoline.
And the on-again, off-again talks between Baghdad and the United Nations over Iraq's possible return to the oil-exporting business have further complicated the situation. Why stock up on crude now if Iraq is on the verge of re-entering the market, which would send prices tumbling?
Meanwhile, as gasoline supplies have tightened, demand has soared. Americans are buying bigger cars, driving them greater distances and, with the repeal of the national 55-mile-an-hour speed limit, driving them faster, too.
The net result is consumer outrage over spiking pump prices - particularly in California, where gasoline supplies have been especially tight and pump prices have risen by 21 percent since early February, compared with 12.4 percent nationally. It has also caused political jockeying in Washington.