Chevron Memo Raises Suspicion

[warrior1]

Former Oil Company Executive Talks With KCRA 3

http://www.kcra.com/news/9169983/detail.html

SACRAMENTO, Calif. -- A Chevron memo is raising suspicion that oil executives intentionally reduced refining capacity in an effort to boost profits.

The 1995 memo, obtained by Consumers Union, reads:

"If the U.S. petroleum industry doesn't reduce it's refining capacity, it will never see any substantial increase in refinery profits."

In the last 20 years, 18 of California's 32 refineries have shut down. The industry is now seeing record prices and profits at the pump.

On Friday, former oil and gas executive Joe Sparano spoke with KCRA 3 and made no apologies for continued rise in gas prices. In fact, he explained that prices are a direct result of driver demand far exceeding gas supply.

snip

[rucky]

1. Time for some Class Action!

unfortunately, this got exposed in California, and we know how they rolled over for Enron's price-fixing.

[neoblues]

5. Radical Idea...

The idea (while it wouldn't fly, and it sounds un-American)... is to threaten to socialize petroleum refining capacity, might at least shake them up a bit... If we must avoid outright government takeover, perhaps the government could enter the game competitively by building refineries of it's own on behalf of the people.

Of course, in proper Capitalism under a Democratic Republic, the solution would be simple enough--sufficient government regulation, including criminal prosecution for anti-competitive market manipulation. After all, Oil Companies agreeing to restrain the supply smacks of monopoly (or oligopoly)...

Oligopoly / Public Firm / Mixed Oligopoly Model might be relevant...

[rucky]

6. How did Chavez manage to do it?

we can follow his playbook & have universal healthcare within 5 years.

[Kolesar]

14. I think Britain has a nationalized gasoline distribution system

...as does Mexico and many European countries. I recall that from a conversation with an energy activist I met years ago. They won't let the oil companies have all that power in their countries.

[texasleo]

15. Mexico is not a good example

PEMEX was the only oil company in the world to lose oil last year.

Something along the lines of PDVsa would be better.

[warrior1]

2. kickity kick

[rucky]

3. Kick

this needs to be high up on the Greatest Page, with all the other scandals.

[riderinthestorm]

4. I thought the shortage of refinery capacity is just one reason for higher

prices.

I believe I've read it's just a part of the problem.

Don't get me wrong, this memo is an important find in that it demonstrates collusion on behalf of the oil industry to drive prices up by whatever means necessary (in this memo, it's about refineries) but someone here on DU put up an excellent article a while back with 4 reasons for why the gas prices were so high and the refinery capacity is just a part of it.

Kicked and recommended.

[spooky3]

8. This memo alone doesn't demonstrate collusion if it

was not circulated outside the company. It would be interesting to know what else is out there.

[riderinthestorm]

16. You are right of course however I interpret the one sentence

that starts with "If the U.S. petroleum industry..." as being an indicator that there was collusion.

And I really do hope there's more evidence out there that will demonstrate there's been an industry wide effort to ramp up gas prices. I am absolutely certain that's a fact.

Peace!

[spooky3]

18. it certainly sounds as if that was the intent!

We're together on this.

:hug:

[Pirate Smile]

13. A big RW TP has been that the limited refinery capacity is the

fault of all those environmental wackos.

This blows a hole in that talking point - not that this will get them to stop spewing it.

[holboz]

7. kickin' this mutha up - eom

[converted_democrat]

9. K&R Good find, thank you for posting this.. n/t

[warrior1]

10. Link to another site

http://www.newshounds.us/2006/04/29/free_market_fantasies_fuel_fox_news_gas_talk.php

[Joanne98]

11. If we get the house back we can have 100's of hearings.......

[liberal N proud]

12. Kick

[Brazenly Liberal]

17. That "supply and demand" argument is a big, steaming pile of dung.

It's basic economics:

1. There's nothing about having a demand greater than the available supply that intrinsically raises prices. Let's say I have a lemonade stand where I normally sell 20 glasses of lemonade a day. If I have my 20 glasses to sell and suddenly there are 30 people who want lemonade, I can get away with raising my prices. I don't have to raise them, but if price gouging appeals to me, I can get away with it. Similarly, if there is an increased demand for gas because Americans like to drive around in gigantic gas-guzzling Penismobiles, the oil companies can get away with higher prices - but it's not like it's something beyond their control, not like it's something they have to do to stay in business and maintain a steady profit level.

2. If I spill the bag of sugar one day, my expenses go up and I have to charge more for each of those 20 glasses in order to maintain my profit level. If I charge just enough to make up for the unexpected expense of buying a bag of sugar, my profits will be flat - the same as they were last week.

3. If I normally sell 20 glasses a day, but this morning the lemon squeezer broke and I only have 10 to sell, I need to double my price in order to maintain the same level of income. Somewhat less than double will be sufficient to maintain the same profit level.

If the oil companies had flat profits, I might be willing to listen to their sad stories about supply and demand or about unexpected expenses, or whatever other BS they're selling. When your expenses go up, it takes more income to maintain the same profit level. But their profits aren't flat. They're setting records for obscene profit growth.

I keep hearing it's complicated, but it's not. Simple lemonade stand economics reveals they are increasing their prices more than they need to increase them to maintain their profit level. They can take their "supply and demand" or their "not enough refineries" or their "hurricane costs" or their goddam spilled sugar and kiss my ass.

[BigBearJohn]

19. Well, that just about says it all, doesn't it?

[jbnow]

20. I haven't looked

or for the report yet but that quote was mentioned in a recent interview regarding a report from the Consumers Union.

Transcript May 4, 2006
http://transcripts.cnn.com/TRANSCRIPTS/0605/04/ldt.01.html
From the video tape shown on Dobbs:

PETER VILES, CNN CORRESPONDENT (voice over): With Americans furious about the spike in gas prices and record oil profits, Congress is taking aim at price gouging at the pump. But a blistering new report says the problem is much deeper than that. It portrays the oil industry as devoid of true competition and uninterested in building new refineries.

MARK COOPER, CONSUMER FEDERATION OF AMERICA: It's a systematic strategy of consolidating the market, eliminating competition, and then underinvesting in capacity. The oil companies have made it clear they're not going to build enough refining capacity to put downward pressure on price.

VILES: The report from the Consumers Union argues the industry has reaped a $100 billion profit windfall -- that's $1,000 a year to the average American family -- by underinvesting in refining capacity to tighten supplies. The report quotes a 1995 Chevron memo that says, "If the U.S. petroleum industry doesn't reduce its refining capacity, it will never see any substantial increase in refinery profits."

And it seems to have been recently repeated, from a bit later in video regarding the report

REX TILLERSON, EXXONMOBIL CEO: We're investing heavily $20 billion a year over the next five years to develop new supply.

VILES: But that $100 billion budget does not include a single new U.S. refinery. Tillerson told "The Wall Street Journal" this week that building a new refinery would be bad for business

Lou says

The Consumers Union doing the work that Congress now wouldn't have to. They have straightforwardly laid it out. We'll se what Congress does with this new report

I've meant to look into the report since I heard this, but honestly thought news sources would make a big deal of it. It was a pretty picture in my mind after seeing it on Dobbs last week. People would hear about it and be outraged. Republicans would be shamed into cutting subsidies to the oil companies, impose a Windfall Profit tax. There would be demands to investigate cheney's energy meetings.
But unless I missed it that didn't happen yet.

.

[warrior1]

21. kick for the breakfast club