Oil Industry Collusion manipulates the market price
Wed Sep 27, 2006 at 09:24:44 PM PDT
I had an occaision to research a bit about the oil industry and its monopolistic practices this past summer. I was alarmed and disgusted by the April/May "here comes the summer driving season price increases" heaped upon the world by the MSM.
It is so damned coincidental that after successive quarters of record-breaking profits, suddenly, before a now very important mid-term election, gas prices plummet. Can the repugs affect gas prices? Not the ones in office, but the ones running the industry can. And they have in the past. And they were found out...
But don't take my word for it... there is actually a congressional report on the subject....
Proof of collusion in the oil industry... why in God's name haven't we heard about it?
Senator Wyden of Oregon released a report in June, 2001.
I was out of work so I wasn't paying much attention to anything outside my world in the summer of 2001, so I can't tell you if it got any media coverage. I became a news junkie after the terrorist attacks, and certainly don't recall anything about it, but it is excellent, and you can find the whole thing at
http://wyden.senate.gov/...
The investigation found emails and letters sent between the CEOs and senior management of various companies to exert pressure to keep mid-sized independent refineries applying for licenses to reopen after expansion or renovation, closed. For instance, this is how it opens:
The Oil Industry, Gas Supply and Refinery Capacity:
More Than Meets the Eye
An investigative report presented
by Senator Ron Wyden
June 14, 2001
"As observed over the last few years and as projected well into the future, the most critical factor facing the refining industry on the West Coast is the surplus refining capacity, and the surplus gasoline production capacity. The same situation exists for the entire U.S. refining industry. Supply significantly exceeds demand year-round. This results in very poor refinery margins, and very poor refinery financial results. Significant events need to occur to assist in reducing supplies and/or increasing the demand for gasoline."
Internal Texaco document, March 7, 1996
"A senior energy analyst at the recent API (American Petroleum Institute) convention warned that if the U.S. petroleum industry doesn't reduce its refining capacity, it will never see any substantial increase in refining margins...However, refining utilization has been rising, sustaining high levels of operations, thereby keeping prices low."
Internal Chevron document, November 30,1995
The findings of Sen. Wyden's report include revelations about companies witholding gas to manipulate the market, about the steadily declining production of the Bigs, and the rising profitability of the industry:
FINDING 1:
Oil Companies Articulated their "Need" to Reduce Oil and Gas Supply to Increase Prices and Grow Profit Margins
....snip....
FINDING 2:
Oil Company Competitors Planned Opportunities to Subvert Oil and Gas Supply
On June 11, 2001, the Wall Street Journal reported that Marathon Ashland Petroleum intentionally withheld reformulated gasoline supply in the Midwest in a contrived effort to keep prices, and profits, artificially high. Although Marathon was reported to have operated alone in this instance, documents suggest that over the past five years other leading oil companies have worked together to control the amount of gasoline available
on the market.
....snip....
FINDING 3:
Closing Refineries: Oil Companies Act to Inhibit Supply
snip...
FINDING 4:
Record Profits: Oil Companies Reap Benefit of Higher Prices at Pump
Despite complaints indicting the cost of environmental compliance and manufacturing "boutique" fuels, in the 2000 the oil and gas industry enjoyed record profits that reflect
record gas prices. According to Texaco's 2000 Annual Report, the company's production steadily decreased from 1998 to 2000, yet its net income more than quadrupled during the same period - with Texaco posting well above $2.4 billion in net income in 2000.
...snip...
Right now I'm singing "memories" thinking of $10Billion in quarterly profit today (XOM).
FINDING 5:
National Energy Policy Incentivizes Oil Companies to Expand Refinery Capacity
The Bush administration's National Energy Policy, released in May, points to lagging profit margins and costly environmental regulations during the past decade as the reason for lost refinery capacity. The report also states that, "excess capacity may have deterred some new capacity investments in the past," and that "more recently, other factors, such as regulations, have deterred investments."
Oil companies cited excess capacity in the mid-1990s as a cause of inadequate profit margins. It was this excess capacity that the companies sought to eliminate in order to
improve their margins. Subsequently, refineries were closed. The industry documents cited earlier indicate that oil companies may have closed those refineries specifically to
tighten supply and drive up costs.
...snip....
That an energy policy came out in May of 2001 is an insight into what the Bush administration was doing during its first eight months instead of taking the threat of terrorism seriously. But that's another subject...
Since it has been found that gas supplies have, in the past, been witheld from the market to influence prices, it is no stretch to assume they can also dump supply on the market to reduce prices. Why would they do it? The current regime has rewarded them with tax breaks and incentives even when they have all reported record profits repeatedly... They are very interested in maintaining the status quo.
Even though the report is five years old, its findings are still relevant and an insight into the way the industry works, and it deserves some time in the public eye.
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