Durbin: Consumers Hit Hard By Increasing Shipping Costs

Press Release

Durbin: Consumers Hit Hard By Increasing Shipping Costs

Rising diesel fuel prices are having a catastrophic effect on the trucking industry and a direct impact on the cost of all consumer goods, United States Senator Dick Durbin (D-IL) said today while discussing his solutions to the crisis at a local diesel station. Families struggling with prices at the pump are hit again when they buy virtually any consumer good.

The average food item travels 1,500 miles before reaching the consumer, Durbin said, citing just one example of how shipping costs are impacting the cost of consumer goods. "Increased shipping costs are added to the milk you buy at the grocery store, the tools you buy at the hardware store, and the shirt you buy at the department store," Durbin said. "Families frustrated as they seem to pay more for almost everything these days often don't realize the direct connection to the cost of diesel fuel."

Durbin noted the astronomical profits reported by oil companies for the first quarter of 2008 and called for a windfall profits tax to hold oil companies accountable for unconscionable price gouging and profit taking.

"Oil companies have been making money hand over fist as oil prices have risen," Durbin said. Last year the big oil companies reported making $123.9 billion in profits, which is about $230,000 in profits per minute. This year, oil companies are on target to make even more money -- $270,000 per minute - if current trends hold. At the same time, American families and businesses are struggling. The average American household spent nearly 5 percent of its income on gasoline when the price per gallon of gas was only $1.51 in 2001. Now, Americans spend 10 percent of their income on gasoline. This year, the trucking industry is on pace to spend $141.5 billion on fuel -- $29 billion more than last year and more than double the amount in 2004."

ExxonMobil posted a 17% rise in first-quarter income—reporting a profit of $10.89 billion—and Royal Dutch Shell announced a $9.08 billion first-quarter profit. BP announced that they made $7.6 billion in profits in the first quarter and Chevron reported $5.17 billion in profits for the first three months of this year. ConocoPhillips reported 2008 earnings for its first quarter are up 17%, hauling in more than $4 billion in profits in three months.

"Profits for the five largest integrated oil companies have more than quadrupled in just six years, yet those profits are not being reinvested in infrastructure and increased production to ease rising prices, nor are they being used to make it easier for us to use alternative fuels in cars and trucks," Durbin said. "The oil companies seem to have little interest in making the investments that might eventually relieve consumers of the high prices they're facing at the pump."

Earlier this month the Federal Trade Commission (FTC), at Durbin's urging, agreed to launch an inquiry into the record high fuel prices facing American consumers. The commission, which is responsible for investigating consumer protection and competition issues in broad sectors of the economy, announced the investigation at their annual budget hearing before the Senate Appropriations Financial Services and General Government Subcommittee, which Durbin chairs. The FTC is tasked with investigating anticompetitive business practices. In addition, the commission monitors gasoline and diesel prices and can take enforcement actions for violations of antitrust laws. The FTC last investigated high gas prices in the aftermath of Hurricane Katrina in 2005.

"As summer approaches drivers and air travelers across America are feeling the heat from record high fuel prices and projections suggest it's only going to get worse," Durbin said. "Yet these record-breaking prices are coming at time when the oil industry is reporting record-breaking profits. I'm pleased that the FTC is taking the issue seriously and has opened an investigation; we must ensure that American consumers are not falling victim to price-gougers and profiteers."

In 2001-02, capacity at America's refineries was above 90 percent in 19 of 24 months. That same rate held true in 2003-04. In 2005-06 capacity was above 90 percent in only 14 of 24 months. In 2007 and the first two months of 2008, capacity topped 90 percent in just 2 of 14 months.

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