NEWS ROUNDUP: Oil Investigation Story Making Waves Across West Coast

Consumer Watchdog president: ‘This is like Enron all over again, and I think that’s why we have this level of outrage’

WASHINGTON, D.C. – The call last week by all six West Coast U.S. Senators for the Department of Justice to investigate the cause of gas price spikes in May and October in Western states is making headlines across the nation.

On November 27, Senators from Washington, Oregon and California sent a letter to DOJ calling on the department’s Oil and Gas Price Fraud Working Group to investigate whether market manipulation or false reporting by oil refineries contributed to near-record gas prices in Western states this year.

The letter comes on the heels of a report from McCullough Research that some West Coast oil refineries may have been producing oil last May despite public reports that they were shut down for maintenance or other reasons.

McCullough’s report also indicates that West Coast oil inventories were at historical levels in October – and were rising in May – at the same time as gas price spikes. In addition, the national price of crude oil, the main driver of gasoline prices, was decreasing in October and May, complicating market fundamental explanations for the price spikes. 

A round-up of the news coverage follows:

  • The Rachel Maddow Show (MSNBC-National), November 30,

Rachel Maddow: “What was it about the price spike in May and then again in October that seemed suspicious to you? Is there something that tipped you off to start questioning whether or not that was a legitimate price spike just explained by supply and demand?”

Senator Maria Cantwell: “Well, my constituents tipped me off that they were frustrated gas was going towards $5. What they knew is that one refinery went down, but why was everybody else saying that they were offline or a lot of the market response basically saying the price spike was caused by a shortage? We want the FTC and the Department of Justice to be the policeman on the beat on something so important as gas. As you said, it`s like the lifeline of an economy. If you affect it by that price spike, it really does affect day to day consumers and our economy and jobs and everything else.”

LINK: http://www.msnbc.msn.com/id/26315908/#50034441

  • KESQ (ABC-Palm Springs), November 28, 2012.                 

“Gas prices are falling and memories are short, but not short enough to have forgotten the specter of five- dollar-a-gallon gas. …

‘I think this is really big. I haven’t seen a movement like this among the Western Senators before. This is like Enron all over again, and I think that’s why we have this level of outrage.’” – Jamie Court, President of Consumer Watchdog

  • KNX (CBS-Los Angeles), November 28, 2012.

“The call for gasoline refinery production of price investigation appears to be popular among the drivers I've been speaking with.”

  • “Senators seek U.S. probe of refineries’ actions in gasoline market,” by Ron White, Los Angeles Times, November 27, 2012.

“In the letter the senators say an investigation is needed to determine whether false or misleading information was used to create a perception of a fuel supply shortage. That might have helped boost fuel prices, the senators say.”

  • FOX 28 News (FOX-Spokane), November 28, 2012.

“The new demand for a refinery-by-refinery probe comes after a report from an Oregon-based research group that found refineries which claimed to be offline were actually still in operation. That’s a problem because those supposed offline refineries caused gas prices in the West Coast to skyrocket about four dollars in May and October. It's not clear why the refineries would mislead regulators.”

  • “Energy price manipulation found on two fronts,” by Thomas D. Elias, Ventura County Star (California), November 29, 2012. Also ran on Redding Record Searchlight (California).

“Anyone who thought manipulation of California energy prices ended with the criminal penalties assessed against executives of companies like Enron and Williams Energy after the state’s 2000-2001 electricity crunch turns out to have been hopelessly naive. All the available evidence now suggests price-fixing continues not only in electric power, but that gasoline is also in play.”

  • “Senators ask Justice to probe California gasoline prices,” by Roberta Rampton, Reuters, November 27, 2012. Also ran in the Chicago Tribune, The New York Times

“On October 5, Reuters, citing sources, reported that a ‘short squeeze’ in trading markets may have played a role in an unprecedented wholesale price increase of almost $1 a gallon for California-grade gasoline. California's two Democratic senators -- Barbara Boxer and Dianne Feinstein -- have both cited the Reuters report as cause for further investigation.”

  •  “Western lawmakers seek probe of refineries,” by Kevin Freking, Associated Press, November 27, 2012. Also ran in the Bellingham Herald, Spokesman-Review, Tacoma News Tribune, Walla Walla Union Bulletin, Tri-City
    Herald, Idaho Statesman, The Sacramento Bee, ABC News.com,
    KPBS Radio (San Francisco), Houston Chronicle, Anchorage Daily News, U.S. News & World
    Report, Huffington Post,
    WJBF News Channel 6 (Augusta, GA television station), Times Union (New York), CBS 5 (Arizona television station)

“They [the Senators] said records that only can be gained through subpoena can determine whether various refinery companies violated a Federal Trade Commission rule against ‘false or misleading public announcements of planned pricing or output decisions.’ Violations of the rule subject companies to fines of up to $1 million a day per violation.”

  • “Western Senators want refineries probed over high gasoline prices,” by Kevin G. Hall, McClatchy Newspapers, November 27, 2012. Ran in Bellingham Herald, Tacoma News Tribune, Olympian, Tri-City Herald, Miami Herald, Sacramento Bee

“West Coast motorists were led to believe that the price spikes were tied to outages and production problems, but McCullough showed that inventories were building at a time when there were news reports, which refiners didn’t dispute at the time, of possible supply shortages. That all happened as the price of crude oil, the key component needed to make gasoline, was falling.”

  • “Have oil refiners pumped the public? Senators to feds: Find out,” by Joel Connolly, Seattle PI, November 27, 2012.

“The senators cited history — the 2001 manipulation of the energy market by Enron —
and a recent report released to the California State Senate by McCullough Research.  The report revealed that price spikes occurred while crude oil prices were on the decline and inventories were rising.”

  • KOMO 4 News (ABC-Seattle), November 27, 2012.

“Our state's two U.S. Senators are going to bat for drivers over high gas prices.”

  • “GAS PRICES: Did oil firms manipulate market, senators ask,” by Ben Goad, The Press Enterprise (California), November 27, 2012.

“The McCullough report, however found that such manipulation could be easy to coordinate between companies. ‘In highly concentrated industries, the exercise of market power through production reductions or cooperative pricing can require no more than an email or a phone call,’ it read.”

  • “Refineries manipulating gas prices, producing fuel when they say they’re not, according to report,” by Sandy Mazza, Los Angeles Daily News, November 17, 2012.

“Media reports from industry experts attributed resulting price increases to weeks-long shutdowns following the fires. But the McCullough report found that nitrous oxide levels were normal throughout the reported Richmond plant shutdown, as well as during the Cherry Point shutdown. Nitrous oxide, the report explains, ‘is a byproduct of the production process. When units are off-line, no chemical reactions are taking place and no emissions result.’”

  • “Study Looks to Explain Gas Price Hikes,” by Aarti Shahani, KQED Radio (NPR-Northern California), November 16, 2012.

“A supply shortage does not explain the hike in gas prices in May and October. That's according to a new study that has California lawmakers scrutinizing oil companies. …’Markets work best in the light,’ McCullough says. ‘Dark markets are highly profitable, but they're profitable for insiders.’”

  • “Consumer advocates say refineries may have falsified information,” Ron White, Los Angeles Times, November 16, 2012.

“‘It appears that California’s oil refineries falsified public information to drive up the price of gasoline,’ Consumer Watchdog’s president, Jamie Court, and energy project director, Liza Tucker, said in the letter. … Consumer Watchdog said that if the allegation is true, that behavior ‘is criminal conduct and reminiscent of the Enron-like manipulation of the California energy market. This unprecedented information demands a criminal investigation.’”

  • “California lawmakers weigh moves to ensure gasoline supply,” by Rory Carroll, Reuters, November 16, 2012.

“McCullough said there was no way to know for sure whether the gasoline market was being manipulated or not because of a fundamental lack of information on the sector. ‘This is a black hole in our energy picture,’ he said at a hearing of the state Senate Select Committee on Bay Area Transportation. ‘We know very little about what is happening in those markets.’”

“For example, refineries have no obligation to alert the state in advance when they plan to shut down for maintenance, making it difficult for the California Energy Commission (CEC), which oversees the market, to know the full supply picture. And while inventories are reported to the CEC, the industry does not have to say who owns what portion of those reserves, McCullough said.”

  • Fox 40 (FOX-Sacramento, Stockton, Modesto), by reporter Sonseeahray Tonsall, November 15, 2012.

“Think back to October; there were wallet woes for thousands of Californians trying to get from here to there. Everyone understands a shortage putting a squeeze on available gas, and the frantic dash to fill up on what was left, pumping up prices. But a newly released report by McCullough Research says no real shortage existed and thus no reason for drivers to be funding a 66-cent-per-gallon windfall profit for oil companies.”

“‘We ended up with more gasoline in the spike that when he had started. In other words we were increasing our supply at the same time we were hearing that there was a shortage.  That’s consistent with behavior where one of the major players is holding back supply,’ said Robert McCullough, Jr., managing partner of McCullough Research. By analyzing emissions reports, McCullough also says he sees evidence that supposed refinery shut- downs couldn’t have compromised supply because some kept producing. ‘Fool me once it’s your fault.  Fool me twice it’s my fault, as in that old saying. Well we’ve apparently been fooled twice,’ said McCullough.”

  • “Report suggests West Coast gas price manipulation,” by Tim Haeck, MyNorthwest.com, November 15, 2012.

“Rising gasoline prices are often blamed on refinery closures. But new research concludes some West Coast refineries were up and running during claimed shutdowns this year.”

  • “California gas price spikes not tied to refinery outages, group says,” by Kevin G. Hall, McClatchy Newspapers, November 14, 2012. Also ran in the Idaho Statesman, The Sacramento Bee

“October's California spike was explained as partly a market reaction to an Aug. 6 fire at Chevron's Richmond refinery. What's odd about those spikes is that normally prices shoot up during events that lead to supply shortages. But another spike came weeks after the fire at the refinery, and McCullough's research suggests that contrary to a shortage, supply was growing.”

  • “Report: Western refineries made gas during price spikes,” by Michael Winter, USA Today, November 14, 2012.

“Californians were walloped by the October spike, blamed partly on an August fire at the Chevron refinery near San Francisco: about 66 cents per gallon more than historical patterns and inventories.”

  • “State seeks answers in gas price spikes,” by David R. Baker, San Francisco Chronicle, November 15, 2012.

“October's record-setting jump in gasoline prices cost Californians $320 million, and yet state officials lack some of the basic information needed to ensure that refineries aren't playing games with the fuel market. That was the testimony Thursday at a hearing that explored the causes of the price spike, which saw the state's average price for a gallon of regular reach $4.67.”