Oil : Internal memos : intentional shortages


Richard Moore


Group: Internal memos show oil companies limited refineries to
drive up prices

09/07/2005 @ 9:44 am 
Filed by RAW STORY 

Internal Texaco memo, March 1996 

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, RAW STORY has learned.

The three internal memos from Mobil, Chevron and Texaco
illustrate how the oil juggernauts reduced refining capacity
and drove independent refiners out of business in an effort to
increase prices. The highly confidential memos reveal a
nationwide effort by American Petroleum Institute, the
lobbying and research arm of the oil industry, to encourage
major refiners to close their refineries in the mid-1990s.

"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. "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.

-- 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."

-- 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.

Abridged and edited from a release. 


"Apocalypse Now and the Brave New World"

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