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Why A Consumer Group Thinks Oil Companies Worked Together To Inflate Gas Prices

THE DAILY BREEZE
http://www.dailybreeze.com/business/20160209/why-a-consumer-group-thinks-oil-companies-worked-together-to-inflate-gas-prices

Collusion among California oil refiners “artificially inflated” pump prices in a move that enabled oil companies to make a “killing” in the wake of an explosion last winter at ExxonMobil’s Torrance refinery, nonprofit group Consumer Watchdog alleged Tuesday.

Jamie Court, president of the Santa Monica-based group, called for an investigation by the state Attorney General’s Office, something the group has unsuccessfully sought for nearly a year.

But Court hopes anti-trust issues receive a closer look after a copy of a 21-page report titled “Against the Tide: How Missing Tankers Pumped Up Gas Prices and Refiner Profits,” was provided Monday to the state’s Petroleum Market Advisory Committee, which is investigating possible market manipulation and price gouging.

The report outlined several oil company tactics designed to keep gas prices high in California over the final nine months of 2015 after the February refinery explosion, including:

• ExxonMobil “hiding” an oil tanker in Singapore next door to one of the world’s largest refineries for two months last summer as pump prices peaked. Consumer Watchdog claimed the company could have used the vessel to import California-grade gasoline, but satellite data appear to show the ship aimlessly cruising the waters off Singapore.

• ExxonMobil importing just 12 million gallons of gasoline — equivalent to just three days worth of production at the crippled Torrance refinery — while buying cheaper grades of oil from other companies that then was refined into expensive premium gasoline. Before the blast, ExxonMobil was the only company supplying premium gas to the regional spot market.

• Chevron, which has California oil refineries in El Segundo and Richmond, was exporting more than 250 million gallons of gasoline while prices in the state hovered around $4 a gallon, $1 to $1.60 more than the national average at the time.

These oil company strategies meant California drivers paid about $10 billion more for gas than motorists nationwide, a figure that works out to almost $450 per driver.

“They seemed to be working in tandem and, in fact, may have been offering each other special trades of fuel and deals that others in the market were not privy to, which certainly sounds like what you need in order to begin anti-trust prosecution,” Court said. “The oil companies played hide and seek with gasoline just like Enron played hide and seek with electricity.”

Enron, once a major utility, collapsed in 2001 because of widespread corporate fraud and corruption.

ExxonMobil dismissed Consumer Watchdog’s assertions.

“ExxonMobil rejects these allegations and is committed to the highest standards of business conduct, has operated responsibly and in strict compliance with all laws,” spokeswoman Gesuina Paras said in an emailed statement. “ExxonMobil has been importing up to 600,000 barrels a month to help meet California’s fuel demand from as far away as Singapore.”

Catherine-Reheis Boyd, president of the Western States Petroleum Association trade group, blamed California’s regulatory environment for the higher prices.

“Over the past decade, state and regional agencies have promulgated a long list of new regulations that have increased the isolation and uniqueness of California’s fuel markets,” she said. “These factors should be thoroughly and comprehensively analyzed to better understand their effect on fuel markets and fuel costs in California.”

Boyd did not directly address the allegations of oil company collusion in a state where four refiners control 80 percent of the market.

But Court said California taxes and environmental regulations should add about 25 cents to the cost of a gallon of gas, not $1 or more.

California refiners reported record profits last year, Court said.

ABOUT THE AUTHOR:

Reporter covering Torrance, Lomita, Rolling Hills Estates, Palos Verdes Estates. Nick also covers soccer as a sports columnist. Reach the author at nick.green@dailybreeze.com or follow Nick on Twitter: @lasoccerblog @NickGreen007.