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November 13-15, 2005
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Milwaukee, Wisconsin, USA

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Posted on  

April 30, 2002

Senate panel asks oil executives about possible gasoline price manipulation

By H. JOSEF HEBERT, Associated Press Writer

WASHINGTON - A Senate subcommittee wants an explanation from oil industry executives about evidence that some refineries held back supplies to force up gasoline prices during tight gasoline markets in recent years.

A congressional report released Monday said intentional reductions in the gasoline supply added to already tight fuel markets and helped produce some of the sharp price spikes over the past three years, especially in the Midwest.

"In a number of instances, refiners have sought to increase prices by reducing supplies," concluded the 396-page report released by Sen. Carl Levin, chairman of the Senate Governmental Affairs investigations subcommittee.

Levin's panel was scheduled to hear from oil company executives Tuesday about the findings of the report, which was prepared by the subcommittee's Democratic staff.

Levin acknowledged the investigation "did not discover any evidence of collusion," but he argued that gasoline markets are so "highly concentrated ... you don't need collusion to have a big artificial impact on supply" and, in turn, prices.

Red Cavaney, president of the American Petroleum Institute, said a number of investigations including the latest by the Senate subcommittee has cleared oil companies of collusion or other illegal activities in connection with gasoline markets.

"As long as the company or individuals act on their own, when they decide to put their supply on the market is their decision and it's legal. ... It's part of the free enterprise system," Cavaney said in an interview.

The report cited several internal memos dating back to 1998 from major oil concerns that reflected a general strategy by individual companies of using supplies to influence prices.

in 1999, BP Amoco now known only as BP outlined in a memo a series of "significant opportunities to influence" the balance of supply and demand in the tight Midwest gasoline market to assure higher prices.

Among the potential actions cited in BP's "Midwest, Mid-Continent Strategy" memo was to reduce refinery production or ship supplies to Canada instead of making them available in the tight Midwest market. It also suggested limiting pipeline capacity from the Gulf of Mexico to the Midwest by shipping products other than gasoline, providing incentives to other producers not to provide additional gasoline or using environmental regulations to slow fuel shipments.

It's not known whether any of these actions were taken.

Last summer, the Senate report said, "major refiners reduced gasoline production even in the face of unusually high demand ... contributing significantly to the price spike."

And in spring 2000 when prices soared past dlrs 2 a gallon, the report said that Marathon Ashland Petroleum held back some of its cleaner burning, so-called reformulated gasoline from the market "so as not to depress prices."

The report cited one internal Marathon e-mail that warned that if the company unloaded too much of its gasoline it could "thrash the market." Another executive wrote in a memo that he would rather make 40 cents a gallon on 40,000 barrels of gasoline than 10 cents a gallon on 50,000 barrels.

The incident of a refiner withholding fuel in the spring of 2000 had been cited previously by a Federal Trade Commission report, which did not name the company.

A spokesman for Marathon, Chuck Rice, said Monday that Marathon did not withhold gasoline from the market.

"We produced 33 percent more in RFG (reformulated gasoline) in 2000 than in 1999, and we sold every drop we made," Rice said.



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