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Senator Alledges Foul Play

Sen. Ron Wyden (D-Ore.) said internal documents show that some U.S. oil companies deliberately curtailed refinery capacity in the mid-1990s as a way to boost gasoline prices and profits.

Wyden claims to have obtained internal Texaco Inc. and Chevron Corp. showing the companies discussed how to boost prices in the West Coast and 11 states, Reuters reported.

"Information I have received during my ongoing investigation raises serious concerns that the nation's major oil suppliers have set out in a strategic effort to orchestrate a financial triple play -- a coordinated effort that would reduce supply, raise prices at the pump and relax environmental regulations," Wyden said in a statement.

The White House has repeatedly blamed soaring gasoline pump prices on the lack of adequate U.S. refining capacity to produce enough fuel to meet demand. Inquires into fuel marketing practices by refiners in the United States over the past year have failed to find any foul play.

Average U.S retail prices have eased somewhat from a record high of $1.71 per gallon last month, but prices are still about 10 cents a gallon higher than one year ago. Motorists on the West Coast paid an average $1.82 per gallon last week, according to U.S. Energy Department data.

Wyden accused Texaco, Chevron and other oil companies of restricting supply to drive prices higher. He cited a Texaco document dated March 7, 1996, in which the company blamed surplus refining capacity as "the most critical factor" in the gasoline market. "Significant events need to occur to assist in reducing supplies and/or increasing the demand for gasoline," the Texaco document said, according to Wyden.

The American Petroleum Institute (API), a trade group representing the oil industry, said the accusations were "groundless."

Refinery capacity has climbed steadily since 1996 to stand at 16.525 million barrels a day, an increase of 1.3 million, the API said. At a news conference, API distributed copies of a U.S. Energy Department report on the energy market in 1995. It said a warm winter and "continued heavy investment in refinery upgrades and pollution abatement resulted in the third-poorest financial performance in at least 20 years."

API President Red Cavaney said demand for gasoline has risen by 20 percent in the past 25 years while refinery capacity has gone up 11 percent. There was no expansion in the past two years, Cavaney said. "The regulatory overlap has made it so difficult" for firms to be sure an expansion would pay off, he said.

In addition, 24 U.S. refineries have closed since 1995, removing nearly 830,000 barrels per day of refining capacity, according to data from the U.S. Energy Information Administration.
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