Oil Firms Kept State’s Gas Supply Tight To Hike Price, Group Says

A consumer group on Monday accused America’s two largest oil companies — Exxon Mobil Corp. and Chevron Corp. — of deliberately starving California’s gasoline market of supplies last year in a bid to push up prices. An explosion last February crippled a large Exxon refinery in Los Angeles County, prompting a sudden jump in prices. [...] Exxon largely refrained from importing shipments of gasoline to make up for the Torrance refinery’s lost production, even as prices rose. “ExxonMobil rejects these allegations and is committed to the highest standards of business conduct, has operated responsibly and in strict compliance with all laws,” said spokesman Todd Spitler. California even set up a panel of experts, the Petroleum Market Advisory Committee, to root out causes for the elevated prices. (The national average is 48 cents, according to the American Petroleum Institute.) Two California programs to fight climate change — the low carbon fuel standard and the state’s cap-and-trade system — tack on an additional 15 cents. California refineries have always produced a variety of products, some of which are exported in the ordinary course of business and are subject to long-term contractual obligations. Changing refinery operations to respond to unexpected conditions to produce fewer exports takes lead time and must be accomplished within the confines of pre-existing contractual commitments. The report’s central argument, that Exxon kept supplies short to push up the price, drew skepticism Monday from Severin Borenstein, a UC Berkeley energy economist who chairs the Market Advisory Committee. Because Exxon was buying replacement supplies from other California refineries, rather than importing gasoline from some of its own refineries elsewhere, high prices would have hurt the company, Borenstein said. “Can you tell us why you think Exxon would choose to buy in a very expensive spot (wholesale) market rather than supplying itself?” he asked Court during the committee meeting. Exxon would still profit, Court said, if the price the company paid other refineries was substantially below the price Exxon charged gas station owners for the fuel they sell to consumers. Oil companies cannot tell independently owned gas stations what to charge drivers, but they can set the wholesale prices that station owners must pay.