Ken sent the article posted below this evening. Seems that the pusher man wanted to get richer all along, at our expense, naturally. I wonder how much the pusher man's enablers (the Bush, Cheney and the GOP Congress) are reaping from this unparalleled rip-off. Think about it as you fill your tank. LS
EVEN AS THE BUSH ADMINISTRATION CITES A LACK OF REFINERIES AS A CAUSE OF ENERGY SHORTAGES, OIL INDUSTRY SHOW THAT FIVE YEARS AGO COMPANIES WERE LOOKING FOR WAYS TO CUT REFINERY OUTPUT TO RAISE PROFITS. (And that they did indeed. LS)
This story from 2001 is rather eye opening given today's gasoline prices. -K
Leaked Oil Industry Memo Suggests Bid to Curb Refinery Output
Published on Friday, June 15, 2001 by the Associated Press by H. Josef Hebert
Even as the Bush administration cites a lack of refineries as a cause of energy shortages, oil industry documents show that five years ago companies were looking for ways to cut refinery output to raise profits.
The internal memos involving several major oil companies were released Thursday by Sen. Ron Wyden, D-Ore., whose office obtained them from a whistleblower. He said the materials did not necessarily reflect any illegal activities but said some of them "sure look very anticompetitive." In response, Red Cavaney, the president of an industry trade group, said: "This finger pointing six years into the past serves no useful purpose."
Wyden was turning the material over to the Governmental Affairs Committee, which plans hearings on oil industry practices and energy prices. Tight gasoline supplies have been cited repeatedly by the industry and the White House as a primary reason for soaring gasoline prices this year. While pump prices have eased recently, the cost of gasoline jumped an average of 31 cents a gallon nationwide during the seven weeks ending in mid-May, according to government figures presented at a House hearing Thursday.
Because it takes about four years to build a large refinery, planning for a new plant would have had to begin by the mid-1990s, energy experts say. There has not been a new refinery build in the United States in 25 years; in the meantime, dozens of small ones have closed. The documents obtained by Wyden's office suggest that in the mid-1990s oil companies had no interest in building refineries because of low profit margins. In fact, companies were discussing the need to curtail refinery output in order to make more money, the documents suggest.
"If the U.S. petroleum industry doesn't reduce its refining capacity, it will never see any substantial increase in refinery margins (profits)," said an internal Chevron document in November 1995, citing views presented by participants at an American Petroleum Institute conference. A year later, an official at Texaco, in a memo marked "highly confidential," called concerns about too much refinery capacity "the most critical factor" facing the refinery industry. Excess capacity is producing "very poor refining financial results," the memo said.
Wyden said the documents "raise significant questions about whether America's oil companies tried to pull off a financial triple play – boosting profits by reducing refinery capacity, tagging consumers with higher pump prices and then arguing for environmental rollbacks." The institute produced statistics showing refinery capacity has increased since 1996 as refineries became more efficient and some expanded. The figures also showed capacity increasing slower than demand. Cavaney, the institute's president, said the industry's reluctance to invest in new refinery capacity when profit margins are low and supplies are adequate – as was the case in the mid-1990s – was "a normal response in a commodity market."
Wyden singled out a 1996 memo from Mobil Corp., which has since merged with Exxon, that suggests that Mobil was ready for a "full court press" to make sure an independent California refinery, which had closed in 1995, would not reopen. At the time Mobil was concerned that if the refinery, owned by the Powerine Oil Co., resumed production it might force down the price of a special, cleaner burning gasoline by as much as 3 cents. "Needless to say, we would all like to see Powerine stay down," the memo said. "Full court press is warranted in this case." The refinery remained closed.
Texaco spokeswoman Keelin Molloi said Wyden's allegations "divert attention away from legitimate policy questions" about energy needs. As for the 1995 Texaco memo, she said: "Within any company, discussions about the margins and capacity are conducted in a normal course of business and in no way constitutes inappropriate or illegal behavior." Chevron spokesman Fred Gorell said the company "flatly denies any improper conduct involving refinery production levels or gasoline pricing."
Attempts to reach ExxonMobil were unsuccessful.
The need for more refinery capacity has been the focus of President Bush's energy plan. Vice President Dick Cheney has blamed gasoline prices increases on tight supplies caused to a large part, he contends, by the fact that the last new U.S. refinery was built in 1976. In fact, 24 refineries – many of them small independents – have shut down since 1995, according to the Energy Department. That has accounted for the loss of 831,000 barrels a day of refining capacity. Individual refinery expansions at the same time have added 1 to 2 percent of capacity annually.
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