Senator, Energy Investigators Slam Refinery Price Manipulation
The energy investigators who nailed Enron for energy price manipulation that nearly bankrupted California just took aim at oil refining giants including Chevron and BP. May the refiners’ gasoline-price schemes now come crashing down in an Enron-style heap.
We’ve known for years that California and West Coast refiners find endless ways to shut down some of their gasoline production, cutting supplies and jacking up pump prices. They actually make more money from making and selling less gasoline. It explains why West Coast drivers are stuck paying $4-plus a gallon while pump prices take a dive in the rest of the country. Now a credible study and a U.S. Senator have reached the same conclusion–and trying to put some muscle on the oil industry.
Washington State Sen. Maria Cantwell is probably the best-informed on the petroleum industry of all federal legislators, at least among those not joined at the hip with Exxon. She is calling on the the Federal Trade Commission to investigate six major refiners–Alon, Chevron, ConocoPhillips, Shell, Tesoro and BP. It’s a smart move, because the oil lobby has a stranglehold on Congress and most state legislatures. President Obama has tried at least twice to reduce the industry’s billions of dollars in taxpayer subsidies, and gotten nowhere.
Here’s the gist of the story by McClatchy news service’s Kevin Hall:
In a letter being sent to regulators on Thursday and obtained by McClatchy, Sen. Maria Cantwell, D-Wash., calls on the Federal Trade Commission to investigate refinery operators Alon, Chevron, ConocoPhillips, Shell, Tesoro and BP following the shutdown of BP’s Cherry Point refinery in Washington State.
Citing a report by Portland energy consultant McCullough Research – a group whose work helped topple energy-trading giant Enron Corp. – Cantwell questioned why May gasoline prices in her state soared recently to within cents of the local record of $4.35 a gallon set in July 2008. Meantime, gasoline prices nationwide in May fell 17 cents a gallon and oil tumbled more than $14 a barrel.
The McCullough Research report questioned whether the historically low gasoline inventories on the West Coast were really a result of a fire on Feb. 17 that idled the BP plant for about three months.
Gasoline prices on the West Coast had tracked closely with the price of West Texas intermediate crude delivered at Cushing, Okla., but in May veered widely from historical norms, according to the report. Had prices followed supply costs, said the report’s author, Robert McCullough, retail gasoline prices on the West Coast would have dropped to about $3.65 a gallon. Instead, prices have been about 68 cents higher.
The report estimates “a windfall profit of $43 million a day” for refiners on the West Coast as the supply manipulation continues.
…utilize its regulatory authority and responsibility granted by Congress to ensure that Washington state consumers are not subject to “any manipulative or deceptive device or contrivance” that could be resulting in unjustifiably high gasoline prices. In particular, I am asking the Commission, pursuant to the Prohibition on Market Manipulation Rule, to investigate whether or not recent and inexplicable gas price spikes in Washington state are the result of deliberat[e] efforts by West Coast refiners to keep gasoline inventories artificially low.
This is a fight that’s been going on for a long time and California is even more affected by what the refineries are doing. Cantwell would no doubt welcome some company in her effort from Sens. Dianne Feinstein and Barbara Boxer.
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