Suit Accuses 9 Oil Refiners of Conspiracy
The state’s major oil refiners conspired to underproduce a new, cleaner-burning gasoline in California in order to drive prices higher, according to a lawsuit filed Friday by a San Diego lawyer who seeks to make the case a class-action on behalf of all California motorists.
The civil suit, filed in Superior Court in San Diego, alleges that the nine refiners used “their control” over the California gasoline market “to restrict the supply” of the new fuel, thereby “artificially inflating” its retail price.
Prices of all gasoline types soared this spring to their highest levels since the Persian Gulf War in 1990. The increases were particularly sharp in California, where prices surged more than 30%.
The oil companies blamed part of the increase on the added costs of refining the cleaner-burning gasoline, which the California Air Resources Board required be produced beginning March 1.
But the lawsuit, filed by attorney Timothy D. Cohelan on behalf of California drivers as of March 1, alleges that the defendants’ production of the new fuel “has been significantly less than estimated demand,” resulting in retail gas prices that are artificially high.
The oil companies “have agreed not to compete in California” and have “engaged in a continuing unlawful trust in restraint of the trade and commerce” of gasoline sales, the suit alleges.
The defendants include Atlantic Richfield Co. and Chevron Corp., which said they had not yet seen the lawsuit and had no comment, and Unocal Corp., whose executives could not be reached for comment late Friday.
However, those companies and the other refiners in the state, along with industry experts, have argued that a series of external events produced the spike in prices this spring.
Besides the added costs of installing new equipment for refining the cleaner fuel, they noted that world prices of crude oil--from which gasoline is refined--climbed sharply this spring. They also said unexpected temporary shutdowns caused by accidents at key California refineries tightened supplies. That situation in turn caused uncertainty about future supplies, which prompted dealers to quickly buy more gasoline.
The result: The average price of unleaded regular gasoline in California soared from $1.153 a gallon in early February to a peak of $1.545 a gallon in early May, according to the U.S. Energy Information Administration.
The price run-up is being investigated by the Clinton administration. However, preliminary findings by the Energy Department have attributed the higher prices to market forces.
Prices have since drifted lower; this week, the price of unleaded regular dipped below $1.50 a gallon, to $1.498 on average, the agency said.
Cohelan’s lawsuit, which technically was filed for plaintiff Theresa Aguilar as proxy for the state’s drivers, does not seek a specified sum in damages. However, should damages be awarded, the suit seeks to have them tripled, as allowed under state antitrust law.
The suit, citing government figures, said Californians consume an average of 36 million gallons of gasoline daily. Cohelan said that if the defendants were found to have overcharged consumers by, say, a nickel a gallon, the damages could amount to roughly $2 million a day since March 1--before any tripling.
