Troubling Questions for the Oil Industry

You don’t need to go far to understand that "gas pains" can come from something more than spending too long a session with the frijoles out of Mama Maria’s Mexican Monotroch. The main-stream media is having a feeding frenzy, with some prophecying $4.00 a gallon gas.

The rise in fuel prices has raised more than hackles--it’s gotten up the suspicions down at AAA headquarters. Earlier this week (on Tuesday), the venerable automobile club’s director of public affairs, Geoff Sundstrom got his chance to sound off before the US Senate Committee on Energy and Natural Resources.

While Sundstrom’s entire testimony is too lengthy to repeat here (visit the AAA media website to read the whole enchilada), a couple of interesting points did rise to the surface. First, forget about $4 fuel. "AAA thinks prices are likely to move somewhat higher over the next 60 days, perhaps approaching $3.25 per gallon," Sundstrom note. "But the much- ballyhooed $4 per gallon gasoline will not materialize as a national average price unless the oil price marches into the $75 per barrel or higher range – a scenario that is only likely if an unknowable event such as a hurricane or geo-political conflict were to seriously threaten or disrupt energy flows."


Sundstrom then raised a question that many paying-to-pump-petrol Americans are wondering about. "As frustrating and unpleasant as our two previous national experiences with $3 gasoline have been, both were accompanied by an oil price at or exceeding $75 per barrel and a natural or man-made disaster with the real or perceived ability to block the flow of petroleum for some period of time.


"This summer is clearly different, however. This year, $75 oil prices and dramatic news about hurricane damage or a possible war throughout the Middle East are absent. Instead, we have sky-high gasoline prices as the cost of oil rests comfortably near the $60 per barrel target set by OPEC, amidst crude inventories that are routinely described as plentiful. Without OPEC, Mother Nature, or an imminent man-made catastrophe to blame for the high price of gasoline, Americans want to know, ‘why?’"

The AAA representative went on to discuss what he described as the "troubling" situation with American refineries. Why, asks the motorists club, while refineries are having great profits and while employing armies of experts, can’t they do a better job of keeping up with the demand for fuel without the painful results we see on the streets--and at the fuel pumps--across the country.

A good question, indeed.