As drivers prepare to hit the road for the extended 4th of July holiday, consumers will be interested in figures contained in the American Petroleum Institute's mid-summer 2004 update to Congress on U.S. gasoline prices and supplies. The following is the text of API's letter to Members of Congress:
Today, the nationwide average for gasoline is $1.98 a gallon, down 12 cents over the last month, yet 44 cents per gallon above the average price a year ago. Demand for gasoline continues to grow along with the U.S. economy. Refineries are operating at more than 96 per cent capacity utilization, and gasoline production is at record levels so far this year, averaging 8.69 million barrels per day or 365 million gallons a day. Gasoline inventories stand at 206 million barrels, slightly below average for this time of year, providing adequate, although thin, supplies.
Approaching the midpoint of the summer driving season, gasoline prices continue to decline as worldwide crude oil prices move lower from a high of over $42 a barrel just a few weeks ago, to less than $38 a barrel today. However, this is still more than $12 a barrel (or 30 cents per gallon) above the 2003 low of $25.24 achieved in May. Higher crude oil prices, responsible for much of the recent increases, are set on international markets and reflect rapidly growing world demand. The International Energy Agency says global economic expansion is fueling the biggest increase in world oil demand in 16 years.
According to the U.S. Department of Energy, despite the expected increase in OPEC oil production, the summer energy outlook is unpredictable because of uncertainties in the Middle East, continued unrest in several other major oil producing regions, and tight gasoline markets.
Higher gasoline prices have contributed to company revenues, but average profit margins remain below those of other industries in the first quarter, as reported last month in Business Week magazine. The U.S. oil and gas industry earned 6.9 cents on the dollar. The all-industry average was 7.5 cents.
In percentage terms, our profits are small. In dollars, they are large due to the massive scale needed to compete in the worlds largest industry. Typical projects in our industry run in the billions of dollars apiece. For example, a new competitive-scale refinery would cost between $2 to $3 billion. Over the last decade, companies have spent almost $5 billion per year on environmental compliance with refinery and fuels regulations, and close to $9 billion per year when considering all parts of the industry. While significantly improving the environment, these investments also help explain the low percentage return on refinery and marketing investment 5.5 percent over that same period: an amount less than half the 12.7 percent average return for the S&P Industrials.
To keep consumers up-to-date on gasoline and other fuels, API has launched a new web site this summer, "Gasoline, Other Fuels and You."
The energy challenges that lie ahead are considerable. We are committed to providing the country with the vital energy it needs to keep our economy growing. Oil and gas is a long-term, massive- scale, huge-investment business. Few tools are available for providing substantial short-term relief for gasoline consumers. The best way to help is to subscribe to the do no harm rule and work togethergovernment and industry. Congress can take an important step this year by passing the comprehensive energy bill conference report to H.R. 6, with a reduced price tag. We will continue to provide you with information on energy.