- The Washington Times - Friday, June 15, 2001

An Oregon senator released internal oil industry documents yesterday that he said show companies have tried to boost profits by reducing gasoline supply, but industry representatives called the accusations groundless.
The papers obtained by Sen. Ron Wyden, a Democrat, suggest major oil companies considered ways in the mid-1990s to cut refinery output because of low profit margins.
The White House and oil industry executives have blamed higher gas prices on a shortage of refineries. Democrats have said President Bush and Vice President Richard B. Cheney both former oilmen are too cozy with the industry.
Mr. Wyden, who has said the administration's energy plan focuses too much on production, said he would push for congressional hearings into the oil industry's production practices.
"The fact that they did this in the middle 1990s has direct ramifications on today's energy debate," he told reporters at a news conference.
The documents Mr. Wyden obtained include a copy of what appeared to be an internal Texaco Inc. memo from March 1996 in which an executive warned, "Supply significantly exceeds demand year-round. This results in very poor refinery margins, and very poor financial results. Significant events need to occur to assist in reducing supplies and/or increasing demand for gasoline."
In a written statement, Texaco said it disagrees "strongly" with Mr. Wyden's "allegations and inferences… . Within any company, discussions about margins and capacity are conducted in the normal course of business and in no way constitute improper or illegal behavior."
The company also cited the California Supreme Court's decision yesterday to dismiss a class-action lawsuit that says the state's largest refiners conspired to fix prices for cleaner-burning gasoline.
Texaco's statement also referred to the Federal Trade Commission's investigation into rising gas prices this May that found no evidence of collusion among oil companies to fix prices.
Mr. Wyden also released what he called a confidential 1996 e-mail from Mobil Corp., which has since merged with Exxon, that suggests major oil companies were not reluctant during the 1990s to try to force smaller independents out of business.
A California refinery owned by Powerine Oil Co. had ceased operation in 1995 but was trying to start up again a year later hoping to compete in production of a special, cleaner gasoline required by the state.
This gas was selling at a premium and Powerine's re-entry into the market could cause the price to drop as much as 3 cents a gallon, a Mobil executive warned in the internal e-mail.
But granting the refiner's request "would have created an unfair playing field, allowing refiners who had not made the investments necessary to produce cleaner-burning fuels to sell environmentally unfriendly gasoline," ExxonMobil said in a statement yesterday.
The documents Mr. Wyden released should be considered in context, said John C. Femy, an economist for the American Petroleum Institute, an industry trade group.
Companies like Texaco faced a sluggish oil market six years ago, and considered several ways to boost profits, he said.
"They have a fiduciary responsibility to their shareholders to produce a return that is suitable to investors," Mr. Femy said.
At a news conference, the institute distributed copies of a U.S. Energy Department report on the energy market in 1995. It said a warm winter and "continued heavy investment in refinery upgrades and pollution abatement resulted in the third-poorest financial performance in at least 20 years."
Paul Y. Cheng, an industry analyst for New York securities firm Lehman Bros., said the profit margin for refineries during the mid-1990s was "quite horrible. Refineries were not making much money."
The average price of a gallon of regular unleaded gasoline in the United States was $1.16 in 1995, and a $1.24 in 1996, according to the American Automobile Association.
The average price was $1.50 last year, and $1.54 during the first five months of this year, the association said.
While companies like Texaco may have discussed cutting refinery production in internal memos, output has risen steadily since 1996, according to research by the federal Energy Information Administration that the petroleum institute released yesterday.
More than 16 million barrels of oil were refined a day in 2000, up from 15.2 million barrels a day in 1996, the research report said.
Mr. Wyden said he began investigating possible antitrust violations in the oil industry in 1999.
He said a "whistleblower" from within the industry gave him the industry documents he released yesterday.
This article is based in part on wire service reports.

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