Maureen Lorenzetti
OGJ Online
WASHINGTON, DC, June 14 -- The US Senate should hold an investigation to determine if oil companies sought to reduce refining capacity to drive up retail prices, Sen. Ron Wyden (D-Ore.) said Thursday.
Wyden said internal oil company documents raised "serious questions about anticompetitive and anticonsumer practices among the nation's leading oil companies." He disclosed several internal oil company memos from the mid-1990s, obtained from a whistleblower, which described the sluggish gasoline retail market.
One Mar. 7, 1996, a Texaco Inc. document said, "Significant events need to occur to assist in reducing supplies and/or increasing the demand for gasoline in order to increase prices and grow profit margins."
Wyden admitted at a press conference that he "could not assert" that the memos show any illegal activity "but it sure looks anticompetitive."
Sen. Carl Levin (D-Mich.), the new chairman of the Permanent Subcommittee on Investigations, said he wants to hold a gasoline price-fixing investigation, but has not set hearings.
Wyden said if investigations find the practices detailed in the memos are anticompetitive, "Congress should look at ways to bring the competitive juices back to the table."
He indicated that might mean offering more tax incentives to help small refiners compete with larger ones. House Republican leaders are considering tax incentives for small refiners.
But Wyden said he would not support calls by industry and the White House to roll back environmental rules that refiners say have discouraged investment.
Refiners say that rules such as New Source Review have stymied refining construction at a time when the nation needs more capacity. During peak summer demand months, the refineries often run at 97% or more of capacity.
Industry officials told a House subcommittee Thursday they do not expect new refineries to be built any time soon because of stringent NSR emission controls. But existing refineries could expand further, depending on how environmental rules are enforced, refiners have often told Congress and the White House. Industry maintains that past enforcement has gone beyond the letter of the law.
Environmental groups and their supporters in Congress, like Wyden, maintain that regulators have properly enforced NSR and should continue to do so despite infrastructure challenges.
Rolling back NSR is not the answer, Wyden suggested. "That should be at the bottom of the list. Oil companies should not be rewarded with environmental rollbacks because of their own efforts to reduce supply."
Wyden also renewed calls to reimpose an ban on exporting Alaskan North Slope crude. He said that allowing companies to export ANS crude has helped exacerbate West Coast gasoline prices. He also suggested allowing exploration on the coastal plain of the Arctic National Wildlife Refuge would not lower prices because companies might want export ANWR crude if world oil markets made that economic.
Industry reaction
Robert Slaughter, counsel for the National Petrochemical and Refiners Association, noted that recent FTC investigations found no collusion in West Coast gasoline markets nor in the Midwestern gasoline price increases of last summer.
American Petroleum Institute President Red Cavaney told reporters that "every time prices rise there is a government investigation" and that the industry has seen "a dozen investigations and every single one has exonerated industry."
Cavaney also noted that refining capacity has increased over the past two decades by 11% although it has not kept up with a 20% in demand.
Regulatory overlaps have stymied investment so that industry has not been able to close that gap, he noted.
Cavaney stressed the refining industry "is not looking for financial help," to add capacity. However, API does wants the government to "offer more certainty" in regulatory enforcement so capital can flow easier to the downstream sector.
Industry economists note that refining and marketing is a low-margin business with returns on investment often as low as 4-5%.
Record first quarter oil company profits have often been cited by industry foes on Capitol Hill as evidence that price fixing exists.
But House Republican Deputy Whip J.C. Watts (R-Okla.) told the Natural Gas Roundtable Thursday in Washington, DC, "at least nine or ten" other sectors had better corporate profits this year than the oil industry.
Contact Maureen Lorenzetti at [email protected]