Internal Texaco memo, March
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.