California's largest oil refiners calibrated imports and exports of gasoline to artificially inflate gasoline prices during the first nine months of 2015, when gas prices were consistently $1 per gallon higher in California than the nationwide average, claims a Santa Monica-based consumers group.
In a report it submitted Monday to the California Energy Commission's Petroleum Market Advisory Committee, Consumer Watchdog claims there was deliberate market manipulation.
The study of public and private shipping data says that following the loss of 800 million gallons of gasoline from its Torrance refinery, Exxon imported merely 12 million gallons of gasoline, parking its “flagship tanker” in Singapore for months rather than refueling the market. During the height of the summer price crisis, Chevron exports increased to further dry up tight supplies and drive up pump prices, the report claims.
Chevron takes exception to the report's conclusions.
"Exporting refined products from California does not create or contribute to an artificial shortage of California-grade gasoline in California," it says in a statement. "The production of California-grade gasoline is a priority, and California-grade gasoline is rarely if ever exported outside the state."
It says California refineries have always produced a variety of products, some of which are exported in the ordinary course of business and are subject to long-term contractual obligations.
"Changing refinery operations to respond to unexpected conditions to produce fewer exports takes lead time and must be accomplished within the confines of pre-existing contractual commitments," Chevron says.
Consumer Watchdog also says that lack of accurate, real-time information about imports and exports created unnecessary volatility in gasoline prices. Refiners hid imports and exports from view of the market in order to command higher prices, it claims.
"Californians paid $10 billion more than U.S. drivers at the pump in 2015 and the state's oil refiners made record profits because Exxon and Chevron played hide and seek with our gasoline," says Jamie Court, president of Consumer Watchdog. "It's time that the state require real-time full disclosure of tankers' movements, gasoline trades, and inventory levels."
Cody Rosenfield, author of Consumer Watchdog's report, says that the data paint a troubling picture of a dysfunctional market “where refiners can jack up wholesale and retail gasoline prices by failing to adequately disclose shipments."
The group says its research found that during the first nine months of 2015:
• While Exxon's only California refinery was offline for more than seven months, the company imported just 12 million gallons of gasoline. The amount is equivalent to just three days worth of production at their Torrance refinery. The company purchased gasoline from other California refiners instead of resupplying the market.
• Exxon's U.S.-flagged tanker, "S/R American Progress," that is able to move product between United States ports, was idling off of Singapore for two months during the peak of the summer price crisis. The tanker didn't ever deliver gasoline to California, though it could have picked up California-grade gasoline in Singapore, where Exxon controls one of the largest refineries in the world. The ship arrived and left Los Angeles without unloading. The industry news service Platts confirmed Exxon only imported product to meet contractual obligations, essentially drying out the gasoline market.
• Of the major refiners, Chevron exported 65 percent of the gasoline and additives that left the state, over 250 million gallons. When imports ceased prior to the July price spike, exports increased and eight of the twelve exporting ships were carrying Chevron gasoline. Chevron controls 28 percent of refinery capacity in the state.
• The industry's reason for not importing gasoline, the need to use "Jones Act" ships that fly U.S. flags to import from other U.S. ports, is a straw man as prices for the vessels were 20 percent cheaper than the year prior, and were widely available.
• Of the 95 confirmed imports and exports of gasoline and additives to and from California, the ship-tracking industry was aware of just 11 of them – just over 10 percent of shipments. This "dark" market created huge volatility in gasoline prices and unprecedented profits for oil refiners, the report says.
Consumer Watchdog says it obtained data from the California State Lands Commission for the report. The state data show every stop at an oil terminal by any vessel – and the product that was loaded or discharged. This after-the-fact information was compared to real-time market reports from ship tracking and financial services.