As the sun rises in the Earth Day sky toward high noon, the California Energy Commission in Sacramento will be ground zero for the debate on what to do about the highest gasoline prices in the nation, which California has endured all year due to record profits by California oil refiners.
Consumer Watchdog will face off against the Western States Petroleum Association just after 11 AM Friday before the state panel assigned to investigate and report on gasoline price manipulation. Our case is that transparency and sunlight on the oil refining and distribution industry will avert future gasoline price spikes.
The public, regulators, and the market need more information to counter the 4 oil refiners that control 80% of gasoline production in California and, in Southern California, also control prices at 80% of the gas stations, which are branded.
Southern Californians have consistently paid $1 plus more per gallon at the pump during 2015 since the outage of Exxon's Torrance refinery. Only the big oil refiners knew how dry the market would be for how long and they were making a killing by not supplying it more fully or charging lower prices than their competitors. The proof's in their profit reports.
On Earth Day, we'll pull back the curtain on how much more information about refinery outages, estimated up-times after outages, wholesale gas pricing, and gasoline trades is needed to keep oil refiners more honest. The oil lobby will argue, ironically, it cannot provide such information, because that would be tantamount to collusion. We'll show how oil refiners already know almost everything about their competitors, but it's the consumer that's left in the dark.
The tragedy is that these are not new issues. Anti-trust litigation between 1990 and 2000 revealed that oil refiners shared too much information with each other, but the judge did not feel it rose to the level of collusion because it was in their business interests to do it.
One of the players in the case, Aguilar vs Atlantic Richfield Company, was John Faulstich, Mobil’s business optimization leader for the Supply & Logistics Group at Mobil’s Torrance refinery, who had the responsibility for preparing price projections for the various products manufactured at the refinery. Faulstich will make a presentation Friday arguing against spreading more sunlight on Big Oil on behalf of Stillwater and Associates, whose principal Dave Hackett is a member of the Petroleum Market Advisory Committee, the CEC panel making recommendations to the Governor.
Faulstich was deposed in the Aguilar litigation by the plaintiffs to show how common consultants were critical in sharing and acquiring competitor information. Faulstich is said to have written a letter to a consultant in 1995 with a specific inquiry, and was provided with refiners plans to modify units at Shell, ARCO, Chevron, Exxon & Unocal refineries.
Such information sharing happens at industry functions, social clubs like Long Beach's Petroleum Club, in agreements between refiners, and through industry newsletters like the Lundberg Survey, which publishes daily wholesale prices for the the right price.
If Big Oil knows, why shouldn't the rest of California? And possibly a few players in the market who want to sell us gasoline cheaper, as well as regulators, journalists and investigators who might pull apart supply and price manipulation schemes in real time.