BP denies charges of gasoline market manipulation

Oct. 31, 2000
BP officials denied charges of gasoline market manipulation contained in a civil class action suit filed this summer in an Illinois state court against it and five other major oil companies.


BP officials denied charges of gasoline market manipulation contained in a civil class action suit filed this summer in an Illinois state court against it and five other major oil companies.

"We have been very open about the causes of this summer's (gasoline) supply disruption in discussions with our customers and in our testimony before the US Congress and Illinois legislative committee looking into the mater. We believe this suit is without merit," said Tom Mueller, BP spokesman.

He said the class action suit was filed in June in an Illinois circuit court by a person who is campaigning for election to the Illinois Supreme Court. Named in that suit were Amoco, now a unit of BP; Mobil Corp., now a unit of ExxonMobil Corp.; Citgo Petroleum Co.; Phillips Petroleum Co.; Clark Oil & Refining Corp.; and Shell Oil Co., he said.

The Federal Trade Commission also is looking at the fly-up in US gasoline prices (OGJ Online, July 28, 2000). Therefore, Mueller said, "We cannot comment regarding any specific allegations this lawsuit may contain."

Instead, BP officials at a Sunday press conference in Chicago distributed an Oct. 18 report by the American Petroleum Institute that refutes similar charges of price manipulations in a summer study sponsored by the Foundation for Taxpayer and Consumer Rights. That was done to counter a Sunday press conference by the plaintiff in the Illinois suit, Mueller said.

API refutes study
The consumer study was done by Tim Hamilton, a former service station operator-turned-industry consultant in Olympia, Wash. That study concluded that major refiners and marketers shipped reformulated gasoline supplies out of the midwest Petroleum Administration for Defense District II (PADD II), which includes Chicago, in an effort to drive up pump prices. It also said that refiners exported gasoline supplies that could have been reformulated.

PADD II suffered the worst impact of the gasoline price spike, with increases of 40-65�/gal, or as much as 43.8%.

The consumer study recommends that:

� State and federal official adopt a nationwide standard for gasoline formulations "so oil companies can no longer manipulate inventories in a manner that creates price spikes."

� Close "loopholes" in antitrust and commodity trading laws to provide for criminal prosecutions for "creation of price spikes."

� Pass measures to "control the flow of crude and refined product exports to ensure that multinational oil companies do not abuse the interests of this nation and its citizens."

The API report says, "The study cites only shipments out of the district. It does not cite shipments into the district, which are on average 6 times larger than the shipments out. � Net receipts in the first quarter of 2000 were 19% above 1999 first-quarter levels."

Some refineries in PADD II border states of Oklahoma, Ohio, North Dakota, Tennessee, and Kansas may have shipped gasoline across state lines into nearby markets in adjoining PADDs "because shipping costs were much lower."

However, the API report said, "This is simply an efficient business process that lowers costs to consumers. Characterizing transfers out of the PADD as a conspiratorial practice, as the study does, is simply wrong and misguided."

Moreover, API officials said, "The study � ignores the fact that exports of gasoline from PADD II declined by 35% between the first quarter of 1999 and the first quarter of 2000."

It also said the consumer study "barely mentions the effects of disruptions caused by a major pipeline shutdown at a crucial time" and ignores other industry conditions.