Oil company executives deny plotting to keep gasoline prices high

Posted: Wednesday, May 01, 2002

WASHINGTON (AP) -- Oil executives disavowed internal memos obtained by congressional investigators that suggest a campaign to manipulate gasoline supplies to boost prices, especially in California and the Midwest.

The internal documents were cited at a hearing by the Senate Governmental Affairs investigations subcommittee Tuesday as evidence that oil companies plotted to reduce supplies to assure high prices in tight gasoline markets.

''Price spikes are becoming a way of life,'' Sen. Carl Levin, D-Mich., the panel's chairman, told the oil executives. He said there is strong evidence that companies worked to keep markets tight by curtailing supplies when necessary.

In Alaska, the state attorney general's office is investigating Alaska gasoline prices, among the highest in the nation despite the fact that Alaska holds the North America's largest oil fields and has enough local refining capacity to meet demand. The companies deny colluding to keep prices high.

In Tuesday's Senate hearing, Levin repeatedly questioned a vice president of BP about a 1999 BP Amoco document that discussed numerous ways supplies could be cut to influence prices, including proposals to export gasoline to Canada or ship products other than gasoline to take up space on crowded pipelines. The document also said other companies might be influenced to cut production, or environmental rules could be used to curtail shipments.

Ross Pillari, a BP vice president for marketing, acknowledged the 1999 memo was discussed in a brainstorming session by senior executives, but he said the proposals ''were viewed as inappropriate'' and summarily rejected.

''It was naive to think these kinds of activities would influence the marketplace,'' said Pillari, who was not at the meeting. He said the employees who drafted the memo were later ''counseled'' by BP Amoco management.

Levin called the document ''outrageous'' and said it supports the conclusion of a subcommittee staff report into gasoline pricing that suggested that oil companies are often intent on propping up retail prices by cutting back on production.

Gary Heminger, president of Marathon Ashland Petroleum, one of the country's biggest refiners, distanced himself from a 1998 internal Marathon document that appeared to welcome oil production cuts by OPEC and refinery interruptions caused by a Gulf Coast hurricane.

The oil cartel's attempt ''to rein in output began to bear fruit,'' the internal Marathon analysis said, adding that ''nature stepped in to lend the oil producers a helping hand'' as Hurricane Georges forced major refiners on the Gulf Coast to shut down.

''I apologize for any inference whatsoever that is taken from this document ... that my company would find pleasure in any natural disaster,'' said Heminger. ''Closing a refinery would never help a producer.''

''When OPEC reins in output it is bitter fruit for most people in America,'' replied Levin. ''Your document says it's good.''

BP's Pillari and executives from Shell Oil Products and ChevronTexaco Corp. said they had little to add to memos that suggested that companies in California tried in the early and mid-'90s to manipulate gasoline supplies to prop up prices.

Many of those memos, also cited in the subcommittee report, had been disclosed previously in various investigations and lawsuits. A court in California found they failed to show price fixing or collusion.

In one, a Texaco official said that Shell and other oil companies were concerned about apparent plans by Texaco to undercut the market with imports of a newly required, cleaner-burning gasoline. The memo said Texaco was viewed as ''a wild card'' whose actions could lead to lower prices.

The Shell and ChevronTexaco executives denied having any detailed knowledge of the circumstances surrounding the 1992 memo.

Rob Routs, president of Shell Oil Products, said it was ''absolutely forbidden'' to inquire about another companies' refining plans. ''I find it incredible if a conversation like that has taken place. ... That is absolutely unacceptable.''

The oil executives told the subcommittee that recent price spikes simply reflect market conditions and that refineries have worked aggressively to maintain supplies in a tight market.

''There has not been any conspiracy,'' said David Reeves, president of North American Products at ChevronTexaco. He said the mergers ''have increased competition, ... created stronger companies better able to compete.''

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.


On the Net:

Senate Committee on Governmental Affairs: http://www.senate.gov/(tilde)gov--affairs/

American Petroleum Institute: http://api-ec.api.org/

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