Boxer Touts Bill on Oil Industry Competition
Wholesale gasoline prices have dropped sharply since mid-April but retail prices have failed to keep pace, reflecting oil company greed and lackluster competition in the California marketplace, U.S. Sen. Barbara Boxer charged during a news conference Monday near a West Los Angeles intersection where three major gasoline brands were selling for similar prices.
“We in California are losing huge dollars because there doesn’t seem to be competition alive and well in our state,” said Boxer, a Democrat who was showcasing legislation she recently introduced that would require merging oil companies to set aside guaranteed supplies for independent refiners and gasoline retailers.
Such a mandate would enhance competition, she said, by ensuring that these usually lower-priced retailers would have adequate supplies to keep overall prices in check.
Chevron Corp. spokesman Mike Libbey called Boxer’s price comparison unfair. One of the gas stations at Bundy and Olympic boulevards that served as a backdrop for the Boxer news conference was a Chevron station that was selling regular gasoline for $1.37 a gallon.
“If you subtract the tax, that’s 90 cents a gallon for gasoline,” he said. “You can’t find water for 90 cents a gallon in a supermarket, so it’s a very reasonable price. It certainly is higher that it was six months ago, but that was an all-time low.”
Gasoline prices began rising in California in February after a series of unrelated mishaps at some of the relatively few refineries that make the cleaner-burning gasoline required by state air regulators. At the same time, world oil prices began rising and gasoline demand increased. Nationwide, prices were pulled higher as well but did not soar as high as in California, where the price of regular self-serve unleaded gasoline peaked at about $1.62 in April.
Oil companies have said that prices increased because of tighter supply and increased demand, but consumer activists and some politicians have charged that oil refiners are profiting at the expense of motorists. The Federal Trade Commission and California Atty. Gen. Bill Lockyer are investigating gasoline pricing practices in California.
Meanwhile, about 40 gasoline station owners who pump the Shell and Texaco brands plan to file an antitrust suit today in U.S. District Court in Los Angeles, accusing the two oil companies of conspiring to fix prices. The lawsuit will also name Saudi Refining, which is involved in a gasoline retailing joint venture with Houston-based Shell Oil Co., the U.S. subsidiary of Royal Dutch/Shell, and Texaco Inc. of White Plains, N.Y. A similar suit was filed about two weeks ago by a separate group of Shell-Texaco dealers in Northern California.
Boxer said the lack of competition in the California market is illustrated by a 30% drop in wholesale gasoline prices since the April peak but only a 15% decline in retail prices during the same period.
“I am stunned to tell you that the big oil companies’ failure to pass wholesale price declines to consumers has cost California drivers a staggering $544 million during the last two months,” Boxer wrote in a letter Monday to FTC Chairman Robert Pitofsky.
Harry Johnson, pricing manager for Atlantic Richfield Co.’s petroleum products subsidiary, countered that retail prices originally rose less and more slowly than wholesale prices: “It shows me that the marketplace is competitive. If in fact we had the power that people think we have, the prices would stay high.”
Boxer’s legislation, under review by the Senate Committee on Energy and Natural Resources, would amend the Clayton Act to give the U.S. attorney general additional authority to block oil industry mergers unless they promoted competition.
