Oil Firms Deny Price Gouging in Recent Surge

Petroleum industry executives denied Wednesday that oil companies have been profiteering at the expense of California motorists during the recent run-up of gasoline prices.

Capacity shortages at several refineries and higher costs for crude oil left them with no choice but to pass on additional costs to customers, they said.

But another witness, Atty. Gen. Bill Lockyer, told a state panel that his newly launched investigation of the price increases has found “sufficient initial indications of excess profit taking,” but no evidence so far of illegal price fixing or other crimes.

He said he expects the investigation to require considerable time to complete. “It’s very hard to prove that the oil industry colluded to fix prices,” he said.

An analyst for the state Energy Commission testified that, according to commission figures, the amount that refineries add to the cost of name-brand gasolines soared from 28 cents a gallon early in March to 70 cents a gallon by mid-April. Oil company officials say that amount is needed to cover their costs.

The hearing of the Senate Transportation and Energy committees was called to try to determine the causes of the nearly two-month statewide increase in gasoline prices, which at their peak soared above $2 a gallon in some areas.

Generally, the oil company officials repeated their previous explanations for the price spikes, citing, among other things, the closure of a Tosco refinery in the Bay Area after an explosion killed four workers Feb. 23.

Other refineries, including plants operated by Exxon and Chevron, suffered interruptions in production, which further squeezed supplies, testified Tom Glaviano, a fuel market analyst for the Energy Commission.

Glaviano said prices peaked April 12 when the average price per gallon of unleaded regular hit $1.62. That price compared with $1.10 a gallon two months earlier. In the past several days, prices have begun to inch down.

Glaviano said that an interruption of production at an Exxon plant during what he called a “spring tuneup,” the closure of the Tosco refinery and a temporary cutback at a Chevron facility all contributed to a shortage of refining capacity.

In addition to those incidents, an Arco plant reduced its refining production briefly when a steam generation facility failed and had to be repaired, witnesses testified.

“I think it was about 10 days before it came back up,” said Chris Nobel, senior vice president of retail marketing for Arco. “It was highly detrimental to our ability to supply our customers.”

He said that the incident produced no safety concerns, but that Arco was forced to buy and import gasoline from Gulf Coast sources. “It was expensive to bring gasoline from the Gulf Coast to the West Coast,” he said.

“We had to go out and buy gasoline. We had to adjust and the price goes up,” he said.

Under questioning, however, Nobel refused to estimate the higher cost of importing gasoline. “I’m not trying to be evasive. . . . There’s no answer to it,” he said.

Other industry representatives included executives of Chevron, Shell and Texaco. Exxon and Tosco rejected the committee’s invitation to testify.

The hearing was a virtual replay of a fact-finding session three years ago when the Legislature tried to find the causes of a similar dramatic increase in gasoline prices. At the time, industry representatives blamed it on high crude oil prices and the extra cost of producing a reformulated clean air gasoline.