Lawmakers grilled representatives of oil producers and refiners seeking an explanation for a rise in gasoline prices (NYMEX:RBQ13) at the pump amid a boom in U.S. oil production.
Senators at an Energy and Natural Resources Committee hearing today complained that fuel exports and refinery shutdowns for maintenance cause regional price surges, while the head of refiner Valero Energy Corp. said local prices reflect global shifts in crude markets and blamed higher costs on the Renewable Fuel Standard, which mandates ethanol use.
“Our people want to know why the flood of new domestic crude oil isn’t lowering prices at the pump,” said Ron Wyden, an Oregon Democrat and chairman of the Senate Energy and Natural Resources Committee. “There is no question that the lower oil costs are not getting through to Americans’ wallets.”
Advances in drilling technology, including hydraulic fracturing, has revived U.S. oil production in states such as North Dakota and Texas, which reached 7.4 million barrels a day in April, a two-decade high, according to the U.S. Energy Information Administration.
Amid rising supplies, pump prices are increasing. Gasoline futures jumped to a four-month high, as unplanned refinery outages may crimp fuel supply. Gasoline for delivery next month rose 3.14 cents, or 1%, to $3.1343 a gallon on the New York Mercantile Exchange today.
Nationwide pump prices are the highest in a month after rising 2.2 cents to $3.635 a gallon, the AAA said on its website. The record high was $4.114 on July 15, 2008. Fuel demand in the U.S. is strongest from late May to Labor Day in early September, the prime vacation period.
In recent months, planned refinery outages or emergency shutdowns for maintenance in the West and Midwest triggered sharp increases in gasoline prices regionally, not tied to the global price of crude oil, lawmakers said.
“The fact that this price spike can happen without real supply and demand disruptions is disturbing,” Senator Maria Cantwell, a Washington Democrat, said at the hearing.
The head of the independent EIA, Adam Sieminski, said that supply and demand is the main determinant of pump prices. The boom in U.S. oil production is helping to hold down global oil prices, and so is benefiting American consumers, Sieminski testified. Greater U.S. exports would actually help keep domestic prices lower by enhancing the global trend, he added.