Posted in: Gas Prices,
by Gregg Laskoski on Nov 28, 2012 02:00 PM
Six U.S. senators have called for the U.S. Justice Department to investigate whether market manipulation by West Coast oil refiners contributed to a price spike in May and October that sent gasoline prices to record highs above $5 per gallon.
Reuters reported Tuesday that the senators want the Justice Department to conduct a "refinery-by-refinery probe" and subpoena records from California refineries to see whether public reports of maintenance shutdowns were accurate. Two of the state's largest refiners are Valero Energy Corp and Tesoro Corp.
"We are requesting a Department of Justice investigation of possible market manipulation and false reporting by oil refineries, which may have created a perception of a supply shortage when in fact refineries were still producing," the senators said in a letter to U.S. Attorney General Eric Holder.
California is the most populous U.S. state and also the biggest gasoline market. It is largely cut off from U.S. national pipeline and refinery networks and thus more subject to supply and price disruptions. We've reported on more than one occasion, too, that the state's own gasoline requirements, which exceed national standards, often put it in a precarious position when supplies tighten.
The senators cited a report from independent energy consultant Robert McCullough that said two West Coast refineries continued to operate throughout May despite reports they were shut for maintenance.
A report issued on November 15 by McCullough Research found that during gasoline price spikes in May and October in California, when drops in production were being blamed for the increases, gasoline inventories actually rose across the state, home to the nation's largest gasoline market.
"An exhaustive review of California refinery emissions data reveals inconsistencies between when refineries were producing petroleum products and publicly reported maintenance shutdowns," the report said.
As you might have expected, Valero, the nation's largest refiner, said past investigations into alleged gasoline price manipulation have consistently come up empty, and that unique factors make the California gasoline market vulnerable to price spikes. Those include boutique blending requirements that make it nearly impossible to import supply from outside the state, said Valero spokesman Bill Day said on Tuesday.
"The self-inflicted factors that contributed to the temporary price increase in California remain in place," Day said. "You don't need a federal investigation to figure that out."
The letter requesting the investigation was signed by senators Maria Cantwell and Patty Murray of Washington, Feinstein and Boxer of California, and Ron Wyden and Jeff Merkley of Oregon.
It's always intriguing when you have two valid points of view at odds with each other. We're keeping a close eye on this to see what, if anything, develops. Just because a request was made is no guarantee that a serious investigation will be conducted.