- The Washington Times - Tuesday, April 30, 2002

The concentration of oil companies and refineries among a few owners allows producers to manipulate gasoline supplies and force up prices to increase profits, a congressional report concluded yesterday.
The investigation by a Senate subcommittee found that intentional reductions in gasoline supplies tightened fuel markets and helped produce some of the sharp price spikes over the past three years, especially in the Midwest.
"In a number of instances, refiners have sought to increase prices by reducing supplies," says the 396-page report released by Sen. Carl Levin, Michigan Democrat and chairman of the Senate permanent investigations subcommittee.
Mr. Levin said "the concentration of oil companies is so heavy that it allows them to manipulate supply without fear of competition," to the detriment of consumers.
He urged tightening of antitrust laws and a tougher review of oil industry mergers to curtail market abuses by the dwindling number of companies. He noted that in some European countries, companies are required by law to keep in storage a minimum amount of oil or gasoline to avert shortages.
Red Cavaney, president of the American Petroleum Institute, said the Senate panel's report vindicates the oil companies because as have previous investigations it found no collusion or illegal market activities in setting gasoline prices.
He said companies have a right, if they act alone, to make market dedications on supply.
"As long as the company or individuals act on their own, when they decide to put their supply on the market is their decision and it's legal. It's part of the free enterprise system," he said.
Mr. Levin acknowledged the investigation "did not discover any evidence of collusion," but he argued gasoline markets are so "highly concentrated you don't need collusion to have a big artificial impact on supply" and, in turn, prices.
The report, written by the Democratic staff of Mr. Levin's subcommittee, cited several internal memos dating to 1998 from major oil companies that outline a general strategy of using supplies to influence prices.
An internal "confidential" memo written in 1999 by BP Amoco now known only as BP suggests "significant opportunities to influence" the balance of supply and demand in the tight Midwest gasoline market to assure higher prices.
Among the potential actions cited in BP's "Midwest, Mid-Continent Strategy" memo was reducing refinery production, shipping supplies to Canada, filling limited pipeline capacity from the Gulf to the Midwest with products other than gasoline, giving incentives to other producers not to provide additional gasoline or lobbying for environmental regulations to slow fuel shipments.
It is not known which, if any, of these actions were followed.
Last summer, the Senate report said, "major refiners reduced gasoline production even in the face of unusually high demand contributing significantly to the price spike."

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