Big Oil says not to blame for high gasoline prices

Oil companies are not overcharging motorists for gasoline, an industry group told Congress on Wednesday, but U.S. lawmakers were skeptical that Big Oil was working hard enough to provide the fuel supplies needed to keep pump prices in check.

Consumers are paying record gasoline prices, currently at a national average of $3.10 a gallon, because of tight supplies and strong motor fuel demand.

The American Petroleum Institute told lawmakers its members were not to blame for high pump costs.

"We recognize that consumers are frustrated with today's higher prices," API chief economist John Felmy told lawmakers on a House panel investigating the price run-ups.

"The contention that higher prices are driven by market failure or market manipulation, including the holding back of supplies, is not credible," Felmy said.

Many U.S. lawmakers and consumer groups are accusing oil companies of keeping some their refineries temporarily offline in order to limit gasoline supplies and push up pump prices.

"Oil companies today are enjoying record profits, and while they could use those profits to invest in more production capacity, instead they use the money to buy back shares in the market," said Rep. John Conyers (news, bio, voting record), who chairs the antitrust panel.

Conyers pointed out that refiners' profits last year jumped 39 percent to $24 billion.

Oil companies earned about $200 billion in excess profits from 2003 through 2006, according to the Consumer Federation of America.

About 800,000 barrels a day in U.S. oil refining capacity are currently shut, resulting in the loss of about 400,000 barrels a day in gasoline production, according to government energy experts. Normally less than 100,000 barrels a day in oil refining capacity is offline at this time of year.

"Shrinking refinery capacity and a reluctance to invest in new infrastructure have significantly restrained gasoline supplies, driving refinery profits to record highs," said Rep. Bart Stupak (news, bio, voting record).

Stupak said refiners are earning 70 cents in profits on every $3 gallon of gasoline sold, when energy experts argue about 20 cents is a more reasonable profit margin.

Stupak has introduced legislation, supported by many lawmakers, to give the Federal Trade Commission more authority to go after companies that overcharge consumers for gasoline.

Felmy acknowledged that many of the nation's aging refineries are temporarily down for planned routine maintenance or had unexpected operating problems that have prevented them from making gasoline.

In a telephone call with reporters before the hearing, Felmy said oil companies were not able to coordinate their refinery maintenance and outages to make sure enough facilities were always operating because that would violate federal antitrust laws.

"But I am sure that they are looking to, wherever they can, return to operations as quickly and safely as they can. I have no doubt that they will be doing that," he said.

Felmy higher crude oil prices, not refinery problems, is the main factor behind expensive gasoline. "More than half the cost of gasoline is attributable to the cost of crude oil."

Felmy also said U.S. gasoline imports have been lower because some European refineries have shut for spring maintenance and there was a recent French port workers' strike that cut into available supplies.

Source : Routers

Stocks up despite mixed housing data

Wall Street shot higher Wednesday after investors shrugged off a mixed reading on the housing sector and focused on the positives: a jump in industrial output, a retreat in crude oil prices and new cash pouring into the stock market. The Dow Jones industrials rose 103 points to another closing record.

Stocks initially slipped after Commerce Department data showed applications for building permits fell by the biggest amount in 17 years during April punctured an early rally. But they gradually regained strength, finding support from a

Federal Reserve

Federal Reserve report that showed industrial output rose more than expected in April, and a rebound in U.S. crude and gasoline inventories that caused crude oil prices to pull back.

Warren Buffett Edward Lampert and Carl Icahn were upping equity investments also gave investors confidence that stocks have further to climb, although the Dow has risen more than 1,300 points in the past two months.

Investors seem to be choosing to take weak housing data in stride; a lackluster read on home sales on Tuesday upended a big rally in stocks that sent the Dow Jones industrials briefly above 13,400 for the first time, but the market quickly regained its footing Wednesday.

"We seem to be in a period of time where it doesn't make a difference what the news is — the market seems to find a reason to go up," said Ron Kiddoo, chief investment officer at Cozad Asset Management. "How long will this last? It's anybody's guess."

The Dow rose 103.69, or 0.77 percent, to 13,487.53, to its 23rd record close of the year. It also hit a new trading high, 13,489.57.

Broader stock indicators advanced. The Standard & Poor's 500 index gained 12.95, or 0.86 percent, to 1,514.14, and the Nasdaq composite index rose 22.13, or 0.88 percent, to 2,547.42.

Strength in sectors such as airlines, helped by falling oil prices, gave a lift to stocks. United Airlines parent UAL Corp. advanced $1.32, or 4 percent, to $34.62; Continental Airlines Inc. rose $1.48, or 4 percent, to $37.83; and American Airlines parent AMR Corp gained $1.28, or 5 percent, to $26.66.

Bonds showed little change despite the economic readings. The yield on the benchmark 10-year Treasury note remained flat at 4.71 percent from late Tuesday. The dollar was mostly higher against other major currencies, while gold prices fell.

Light, sweet crude fell 62 cents to $62.55 per barrel on the New York Mercantile Exchange. Crude prices have risen in recent sessions amid concerns about supply disruptions, particularly in Nigeria, but Wednesday's U.S. inventory data showed domestic gasoline and crude inventories rose more than expected last week — a development that investors hope will help pull U.S. pump prices back below $3 a gallon.

While Wall Street often has an appetite for economic data as it tries to determine where the economy is headed, it sometimes looks past good or bad economic news. In a potentially worrisome sign, requests for new construction permits fell 8.9 percent in April, the biggest drop since a 24 percent plunge in February 1990; but investors were pleased to see that construction of homes and apartments increased 2.5 percent in April from March to a seasonally adjusted annual rate of 1.528 million units.

"It seems like the market has taken a lot of the news positively this year whereas last year investors might have reacted negatively," said Paul Alan Davis, a portfolio manager at Charles Schwab Investment Management Inc.

Investors also embraced the Fed's report that industrial output rose by 0.7 percent in April. The gain was more than double the 0.3 percent gain that had been expected and in part reflected a rebound in manufacturing. In March, output fell 0.3 percent.

In corporate news, Citigroup Inc., one of the 30 stocks in the Dow industrials, rose $2.12, or 4 percent, to $54.91 after billionaire hedge fund manager Edward S. Lampert said he acquired more than 15 million shares of the financial services conglomerate.

Warren Buffett's Berkshire Hathaway Inc., meanwhile, reported in a regulatory filing that it doubled its stake in Johnson & Johnson, also a Dow component. Johnson & Johnson rose $1.23, or 2 percent, to $63.05.

In another sign that liquidity is high and likely to keep buoying stocks, Carl Icahn's fund disclosed a new 3.1 million share stake in oil and gas producer Anadarko Petroleum Corp. and a new 2.7 million share stake in CSX Corp. Anadarko rose 73 cents to $47.20, and CSX Corp. rose 66 cents to $46.40.

Injecting the market with an extra dose of confidence, corporate takeover activity keeps soaring. Bausch & Lomb Inc. rose $6, or 9.8 percent, to $67.50 after private equity concern Warburg Pincus struck a deal to acquire the eye-care product maker, which has faced product recalls and accounting troubles, for about $3.67 billion.

The Russell 2000 index of smaller companies rose 6.02, or 0.74 percent, to 820.20.

Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange where consolidated volume came to 2.82 billion shares, down from 3.09 billion on Tuesday.

Overseas, Japan's Nikkei stock average closed up 0.09 percent. Britain's FTSE 100 fell 0.14 percent, Germany's DAX index fell 0.32 percent, and France's CAC-40 fell 0.53 percent.

Source : news.yahoo.com

Lawmaker links gas prices to investments

WASHINGTON - While oil companies blame soaring gasoline prices on unexpected refinery shutdowns, Congress is questioning whether industry mergers and investment decisions have erased a supply cushion.

House Judiciary Committee's antitrust task force Wednesday opened the first of a number of hearings on oil industry concentration with its chairman noting that gasoline prices have soared well above $3 a gallon and asking, "How did we get into this mess?"

"Oil companies today are enjoying record profits, and while they could use those profits to invest in more production capacity, instead they use the money to buy back shares in the markets," complained Rep. John Conyers (news, bio, voting record) Jr., D-Mich., the panel's chairman.

John Felmy, chief economist at the American Petroleum Institute, rejected suggestions that companies want to curtail production to keep prices high and said refiners have been producing record amounts of gasoline.

"The higher prices reflect an imbalance between supply and demand" and high crude oil prices, said Felmy, whose group represents the major oil companies. He reiterated that refinery shutdowns, a decline in gasoline imports and higher demand are at the core of the upward price spiral. There is no evidence of price manipulation, he said.

Gasoline prices this week reached a nationwide record average of $3.10 a gallon, about 3 cents higher than after Hurricane Katrina devastated Gulf of Mexico oil supplies and shut down the Gulf's refineries, according to the Energy Department.

Rep. Bart Stupak (news, bio, voting record), D-Mich., who has crafted a bill that would make oil and gas price gouging a federal crime, questioned why gasoline prices soared even as crude oil prices dropped.

"In April ... crude oil was $7 a barrel cheaper than last year (but) gas prices were almost 50 cents a gallon higher," said Stupak. "Clearly there's more at play than simply the world crude oil market."

Industry experts and DOE's Energy Information Administration have cited an unusual number of refinery outages for the tight gasoline supply, resulting in higher prices. The agency this week said that as refineries get back on line, gasoline inventories are moving higher and that prices may begin to recede.

Consumer advocate Mark Cooper questioned at the House hearing whether the industry may be keeping supplies tight on purpose.

"By creating a situation of extremely tight supply, the oil companies gain control over price at the wholesale level," said Cooper, who monitors energy industries at the Consumer Federation of America. Despite huge increases in refinery profits, there have been no investments in refinery capacity, he argued.

Felmy said that while no new refinery has been built since the 1970s, the industry has expanded existing refinery capacity at a pace equivalent to one additional new refinery a year over the last decade. Still, he said the decision to build refineries is made on whether it's "in the interest of your shareholders given the uncertainties."

Conyers said one problem has been industry consolidation.

"In 1993 the five biggest refiners in the U.S. controlled 35 percent of the market. By 2004 they controlled 56 percent," he said, adding that in some regions a few refineries control the market.

"With this type of market structure, each individual refinery can limit capacity and drive up prices," said Conyers.

Connecticut Attorney General Richard Blumenthal told the task force that "lax and lackluster" federal enforcement of antitrust laws has led to an explosion of oil industry mergers, "many of them profoundly anticompetitive and anti-consumer."

Source : H. JOSEF HEBERT, Associated Press Writer

U.S. Exports to India for $6 Billion Refinery and Petrochemical Complex Are Backed by Ex-Im Bank $500 Million Loan Guarante

Reliance Petroleum Ltd. (RPL) of India will build a $6 billion state-of-the-art oil refinery and petrochemical complex in Jamnagar Gujarat, India, using U.S. equipment, technology and services financed by a $500 million loan guarantee from the Export-Import Bank of the United States (Ex-Im Bank).

RPL's primary shareholder, Reliance Industries Ltd. (RIL), is a Fortune 500 company and the largest private company in India. The new refinery will be the world's sixth largest and will be located adjacent to RIL's existing refinery and petrochemical complex in Jamnagar. Together the two refineries will comprise the largest refining complex in the world.

Bechtel Corp., Houston, Tex., is providing design, procurement, project management and other services. Major U.S. exporters also participating in the project include: Black & Veatch International Co., Kansas City, Mo., for sulfur recovery and gas treatment units; Dow Global Technologies, Inc., Midland, Mich., for licensing and services for the polypropylene plant process; Foster Wheeler Corp., Clinton, N.J., for fired heaters for the refinery's coker; and UOP LLC, Des Plaines, Ill., for the catalytic converter reactor section and PSA (Pressure Swing Absorption) packages. Citibank N.A., New York, N.Y., is the guaranteed lender on the transaction.

"Ex-Im Bank's long and successful relationship with the RIL group of companies, dating back to the early 1980s, has contributed to growth in the dynamic Indian market while helping to create U.S. jobs," said Ex-Im Bank Chairman and President James H. Lambright. "We hope to support future RIL projects in other industrial sectors."

"This transaction is yet another affirmation from Ex-Im Bank of the growth potential that they see in India and in particular the Reliance Group," said Mukesh Ambani, chairman and managing director of RIL and chairman of RPL. "We look forward to deepening and strengthening our valued relationship with Ex-Im Bank."

Once completed in December, 2008, the refinery will be among the most modern and complex in the world, capable of producing high quality fuels such as gasoline, jet fuel diesel, alkylates, naphtha, kerosene, as well as polypropylene. The refinery's Nelson Complexity Index is 14, compared to the average index of 10 in the United States. This is a measure of the refinery's technological processing capabilities.

Ex-Im Bank's exposure to India, including the current project, is approximately $3.1 billion, with $1.17 billion in additional pending final commitments.

Ex-Im Bank is an independent U.S. government agency that assists in financing the export of U.S. goods and services to markets around the world, through export credit insurance, loan guarantees, and direct loans. In fiscal year 2006, Ex-Im Bank authorized over $12.1 billion in transactions supporting an estimated $16.1 billion in U.S. exports.

Source : Export-Import Bank of the United States

Icahn Discloses Latest Share Moves

Billionaire activist investor Carl Icahn gave shares of Anadarko Petroleum Corp. a lift on Wednesday after disclosing his $2.27 billion fund bought a stake in the company.

Icahn, who recently failed in a proxy fight with Motorola Inc. and launched a takeover attempt for WCI Communities Inc., disclosed changes to his Icahn Management LP fund during the Jan. 1 to March 31 quarter in a late-Tuesday filing with the Securities and Exchange Commission.

Icahn upped his holdings of WCI Communities, a luxury homebuilder, to 4.8 million shares, from 1.5 million held at the end of 2006.

The investor recently offered $22 per share to buy the company, and has nominated a new slate of directors. The company's existing board has resisted overtures and asked shareholders to do the same.

Shares rose 83 cents, or 4.1 percent, to $20.88 after the company said it is willing to entertain higher offers.

The fund also disclosed a new 3.1 million share stake in Anadarko Petroleum Corp., an independent oil and gas producer. Shares rose $1, or 2.2 percent, to $47.47.

Shares of Telik Inc. rose 19 cents, or 3.3 percent, to $5.96. Icahn's fund doubled its stake in the Palo Alto, Calif.-based biotech drug maker to 4.2 million shares.

The fund sold its 2 million share stake in Take-Two Interactive Software Inc., which makes the bloody and popular video game series "Grand Theft Auto." In late March, a group of Take-Two's shareholders successfully ousted five of the company's directors, as well as the CEO.

Shares of Take-Two shed 7 cents to $19.05.

The latest filing shows the fund took a 9.4 million share stake in cell phone handset maker Motorola Inc. The company recently fended off a proxy fight by Icahn, who wanted a seat on the 13-member board.

Shares rose 27 cents to $18.19.

Between Jan. 1 and March 31, Icahn's fund also made several other moves, including:

- Selling its 6.8 million share stake in Federated Department Stores Inc., operator of Macy's and Bloomingdale's. The company on Wednesday said it swung to a first-quarter profit but adjusted earnings missed Wall Street estimates.

- Selling a 4.1 million stake in Hilton Hotels Corp.

- Reducing its stake in media conglomerate Time Warner Inc. by 7 million shares to 12.9 million.

- Buying a 2.7 million share stake in railroad operator CSX Corp.

- Lifting its stake in Temple-Inland Inc. to 5.8 million shares, from 4.2 million. About two months ago, at the urging of Icahn, the company said it would separate into three stand-alone public companies.

Source : biz.yahoo.com