NOW. Transcript. November 11, 2005 | PBS
JAMIE COURT: Oil companies have manipulated supply so that when there’s– gonna be a peak season of demand, they then withhold supply. And when there aren’t adequate inventories, the system is rigged for a shortage, even though it’s artificial.
MARIA HINOJOSA: You’re using these terms “rigged,” “control,” I mean, these are not terms that most people kind of accept in a free market society.
JAMIE COURT: Well, I think the only thing free about this market for oil companies in the United States of America is they’re free to do whatever they want. That’s the market.
MARIA HINOJOSA: After crude is drilled from the ground, it needs to be refined — turned into gasoline, diesel or home heating oil.
But since the peak in 1981, more than half of the refineries that used to operate in the U.S. have been shut down. And that, charge critics, has been part of an industry strategy going back years. …
SEN. RON WYDEN: There is no doubt that during the 1990s, if you just look at the oil companies’ own internal documents, that yes, in fact, what they did is look at how to limit production in order to boost their profits — not my words — the words of the oil industry.
MARIA HINOJOSA: Oregon’s senator Ron Wyden … who’s been following this issue for years … is referring to internal industry documents that came to light during Congressional investigations and court cases.
One example, a Chevron memo from 1995, which included this warning from an energy analyst … “if the U.S. petroleum industry doesn’t reduce its refining capacity, it will never see any substantial increase in refining margins …”
That’s margins, as in profit margins. …
MARIA HINOJOSA: Now, refineries have been faced with tough environmental rules and community opposition — forcing many to close — or making it difficult to open new ones. But critics charge, the oil companies themselves play a role in this too.
Look what happened two years ago in Bakersfield, California.
Shell Oil, one of the industry’s biggest companies, had recently taken this refinery over. Some 400 people worked here and business seemed to be going strong.
It was “one of the few Shell U.S. refineries to turn a profit” according to this company memo, which praised the “world-class performance” of the employees there.
One of them was this man who asked us to hide his identity. He believes Shell wanted to tighten the supply of gasoline and diesel in California and that the company intended to close this refinery down in order to do that.
MARIA HINOJOSA: So just over a year after Shell buys the refinery, Shell is now telling its employees that they wanna sell the refinery?
WHISTLE BLOWER: No, that they wanna demolish the refinery.
MARIA HINOJOSA: They wanna get rid of it entirely?
WHISTLE BLOWER: Yes, correct. They would shut it down and demolish it. …
MARIA HINOJOSA: Shell continues to insist it did not make economic sense for the refinery to stay open. After the release of those documents, critics fought to keep Bakersfield running and Shell ended up selling the facility to a competitor earlier this year.
JAMIE COURT:The reason we’ve seen these price spikes — the reason we’ve seen the profit margins go up, is because a small number of oil companies have been able to consolidate and take control of this market. Independent refiners, if they still existed, wouldn’t allow this to happen because they would fill gaps in the market.
MARIA HINOJOSA: Two decades ago, a quarter of American refining was done by independents. But since then, many of those have shut down, refineries like Powerine, a small operation in Southern California.
It wanted to re-open after a temporary closure but that didn’t sit well with oil giant Mobil, which worried that if Powerine resumed production, gas prices would drop.
That would be good for consumers but bad for Mobil. In internal company emails, a Mobil manager wrote: “Needless to say, we would all like to see Powerine stay down. Full court press is warranted in this case …”
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Bloomberg.com: U.S.
U.S. Probing Plan to Shut Shell California Refinery (Update3)
July 7, 2004 (Bloomberg) — The U.S. Federal Trade Commission is investigating possible antitrust violations related to the planned closure of a Royal Dutch/Shell Group refinery in California, which has the highest gasoline prices in the continental U.S.
Recent Press Release from Barbara Boxer, US Senator from California
Boxer said, “In the electricity crisis that hit California, we learned all too well that special economic interests had manipulated supplies and caused great harm to consumers. Let us not allow California to be hit again with this kind of manipulation.”