Limited Refining Capacity To Drive Up Gasoline Prices

Santa Monica, CA -- The Foundation for Taxpayer and Consumer Rights
(FTCR) today exposed internal oil company memos that show how the
industry intentionally reduced domestic refining capacity to drive up
profits. The exposure comes in the wake of Hurricane Katrina as the oil
industry blames environmental regulation for limiting number of U.S.
refineries.

The three internal memos from Mobil, Chevron, and Texaco (Click here to
read the memos. <http://www.consumerwatchdog.org/energy/fs/>) show
different ways the oil giants closed down refining capacity and drove
independent refiners out of business. The confidential memos demonstrate
a nationwide effort by American Petroleum Institute, the lobbying and
research arm of the oil industry, to encourage the major refiners to
close their refineries in the mid-1990s in order to raise the price at
the pump.

"Large oil companies have for a decade artificially shorted the gasoline
market to drive up prices," said FTCR president Jamie Court , who
successfully fought" to keep Shell Oil from needlessly closing its
Bakersfield , California refinery this year. Oil companies know they can
make more money by making less gasoline. Katrina should be a wakeup call
to America that the refiners profit widely when they keep the system
running on empty."

"It's now obvious to most Americans that we have a refinery shortage,"
said petroleum consultant Tim Hamilton, who authored a recent report
about oil company price gouging for FTCR. (Click here to read the
report. <http://www.consumerwatchdog.org/energy/rp/>) "To point to the
environmental laws as the cause simply misses the fact that it was the
major oil companies, not the environmental groups, that used the
regulatory process to create artificial shortages and limit competition."

The memos from Mobil, Chevron and Texaco show the following:

* An internal 1996 memorandum from Mobil demonstrates the oil company's
successful strategies to keep smaller refiner Powerine from reopening
its California refinery. The document makes it clear that much of the
hardships created by California 's regulations governing refineries came
at the urging of the major oil companies and not the environmental
organizations blamed by the industry. The other alternative plan
discussed in the event Powerine did open the refinery was "... buying
all their avails and marketing it ourselves" to insure the lower price
fuel didn't get into the market. Click here to read the Mobil memo.
<http://www.consumerwatchdog.org/energy/fs/5105.pdf>

* An internal Chevron memo states; "A senior energy analyst at the
recent API convention warned that if the US petroleum industry doesn't
reduce its refining capacity it will never see any substantial increase
in refinery margins." It then discussed how major refiners were closing
down their refineries. Click here to read the Chevron memo.
<http://www.consumerwatchdog.org/energy/fs/5103.pdf>

* The Texaco memo disclosed how the industry believed in the mid-1990s
that "the most critical factor facing the refining industry on the West
Coast is the surplus of refining capacity, and the surplus gasoline
production capacity. (The same situation exists for the entire U.S.
refining industry.) Supply significantly exceeds demand year-round. This
results in very poor refinery margins and very poor refinery financial
results. Significant events need to occur to assist in reducing supplies
and/or increasing the demand for gasoline. One example of a significant
event would be the elimination of mandates for oxygenate addition to
gasoline. Given a choice, oxygenate usage would go down, and gasoline
supplies would go down accordingly. (Much effort is being exerted to see
this happen in the Pacific Northwest .)" As a result of such pressure,
Washington State eliminated the ethanol mandate -- requiring greater
quantities of refined supply to fill the gasoline volume occupied by
ethanol. Click here to read the Texaco memo.
<http://www.consumerwatchdog.org/energy/fs/5104.pdf>

FTCR is nonprofit, nonpartisan consumer group. For more information
visit: http://www.consumerwatchdog.org <http://www.consumerwatchdog.org/>


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