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Reuters: US drivers subsidize European pump prices: report

Thu Aug 31, 2006 4:35 PM ET
By Tom Doggett

WASHINGTON (Reuters) – U.S. drivers helped to boost Big Oil’s record profits more than their European counterparts, by paying more for gasoline once taxes were taken out at the pump, according to a report released on Thursday.

The report from the Foundation for Taxpayer and Consumer Rights also showed that profit margins were much larger for multinational oil companies’ refinery operations in the United States than those located in Europe.

While gasoline costs more than $5 a gallon in Europe, most of that pump price reflects taxes. In the United States, federal and state fuel taxes account for a much smaller share of the cost for gasoline.

Based on retail gasoline prices in July, when taxes were taken out European drivers paid 24 cents a gallon less to fill up than their Americans, the study showed.

“Thus U.S. motorists are essentially subsidizing European drivers, who pay more for taxes but substantially less into oil company profits,” the report said.

The report also found that the refinery and marketing profits of Exxon Mobil , Shell Oil Co. , Chevron and ConocoPhillips outside the United States increased by 117 percent this summer compared with 2003, while profits for the same companies at their U.S.-based operations soared an average 334 percent.

American consumers have become the “cash cows” for the international oil industry, the study said.

Unlike U.S. drivers, motorists in Europe and throughout the world have seen gasoline prices increase at a similar rate to the rise in crude oil costs, according to the report.

The study likened the disparities in U.S. and European gasoline prices to pricing in the pharmaceutical industry. “U.S. consumers pay the price for lower profit margins in the rest of the world. Lack of regulation and oversight allow the industry to discriminatingly inflate prices to U.S. customers,” the report said.

The mega-mergers of oil companies over the last decade have made it easier to charge unfair gasoline prices in the United States, according to the report.

The five largest oil companies controlled 35 percent of U.S. oil refining capacity in 1993, but that share jumped to 56 percent by 2004, the study said.

The oil industry has argued that mergers have helped companies reduce their operating costs and those savings are passed on to consumers.

Oil companies also say that high U.S. prices reflect strong motor fuel demand and expensive crude oil. The industry points out that recent government investigations have not found that oil companies acted together to keep pump prices high.
 
© Reuters 2006. All rights reserved.

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