Refiners to U.S. House: High crude oil prices drive high gasoline prices

High crude oil prices are the primary factor behind high gasoline prices, American Fuel & Petrochemical Manufacturers President Charles T. Drevna told a House subcommittee. The most effective actions to help U.S. consumers would be to increase U.S. oil production, increase oil imports from Canada and reduce overregulation, Drevna said.

Drevna noted that, according to the U.S. Energy Information Administration, “only six cents of every dollar that Americans pay for gasoline goes to the refining industry that AFPM represents. The cost of crude oil accounts for 76 cents, followed by taxes at 12 cents, and distribution and marketing also at six cents.

“Refiners, as well as petrochemical manufacturers, are the first customers of a barrel of oil and the first to be impacted when oil prices rise,” Drevna said in written testimony for a March 7 hearing on gasoline prices by the House Subcommittee on Energy and Power.

“Refiners don’t set the price of oil any more than automakers set the price of steel, bakers set the price of wheat or restaurants set the price of cattle,” Drevna added. “Oil is an international commodity that trades in the free market and its price is not controlled by its purchasers.”

Drevna called on the Obama administration to allow increased exploration and development of vast oil and natural gas resources on federal lands and in federally controlled waters to meet U.S. energy needs, create jobs and improve economic and national security.

In addition, Drevna advocated approval of the Keystone XL pipeline to bring 700,000 barrels of oil a day from Canada to Gulf Coast refineries.

Drevna said overly burdensome and conflicting government regulations threaten U.S. competitiveness. He said some regulations are not doing anything to protect the environment but only jeopardize jobs and raise consumer costs. Examples of these are Tier 3 regulations to reduce sulfur in gasoline, greenhouse gas regulations, lengthy permitting delays, and requirements under the Renewable Fuel Standard involving biofuels, Drevna said.

Oil prices have risen recently because of concerns about the future of Iranian oil production, increased oil demand in developing nations and the decline in the value of the U.S. dollar, Drevna said.

“Historically, the best mechanism available to address high crude oil prices has been to take actions to increase the global crude oil supply,” Drevna said. “When America has taken such actions in the past, it has sent a message to the market that our country is serious about meeting our energy and national security needs.”

Drevna said U.S. exports of refined petroleum products -primarily diesel fuel because there is an excess domestic supply -are benefitting American consumers. He pointed out that America imports about 60 percent of the crude oil the nation needs and is not a net exporter of gasoline.

“Exports don’t raise gasoline prices,” Drevna said. “Rather, exports bring billions of dollars to America, preserve and create jobs, strengthen our economy and reduce our trade deficit. In fact, in allowing domestic refiners to run at higher utilization rates, exports are likely keeping consumer costs from rising further. If all American manufacturers and agricultural interests were prohibited from exporting their products, they would produce less -and that could actually raise consumer prices.”

AFPM, the American Fuel & Petrochemical Manufacturers (formerly known as NPRA, the National Petrochemical & Refiners Association) is a trade association representing U.S. manufacturers of gasoline, diesel, jet fuel, other fuels and home heating oil, as well as petrochemicals used as building blocks for thousands of vital products in daily life. AFPM members make modern life possible and keep America moving and growing as they meet the needs of our nation and local communities, strengthen economic and national security, and support 2 million American jobs.