Consumer watchdog questions refinery shutdown

Published on

The Desert Sun (Palm Springs, CA)

WASHINGTON — Shell Oil is reaping big profits from a Bakersfield refinery it plans to close Oct. 1, raising questions over whether the company is trying to keep gasoline prices high by reducing California’s already tight refining capacity, a consumer watchdog said.

Company documents obtained by the Foundation for Taxpayer and Consumer Rights show refining margins at Shell‘s Bakersfield refinery were three times higher than at its Gulf Coast refineries during late March.

Yet, Shell plans to close the facility, leaving California with only 12 refineries.

A lack of refining capacity is partly to blame for California’s high gasoline prices. Regular gas prices averaged nearly $2.20 a gallon Tuesday in Riverside and San Bernardino counties, according to the AAA motorists group.

Regular gas prices averaged nearly $2.13 a gallon Tuesday in the Visalia area, according to AAA. Regular gas prices averaged $2.11 a gallon Tuesday in the Salinas area, according to AAA.

“This is a national example of how refiners cheat rather than compete in the restriction of supply by artificial means,” said Jamie Court, president of the Santa Monica-based watchdog group. The group said it obtained the documents from company sources.

A Shell spokesman said the documents showing the refinery making substantial money in March are accurate, but only represent a snapshot in time and not a long-term financial picture.

“Two out of the last three years we did not make money in the Bakersfield refinery,” Shell spokesman Cameron Smyth said. “That refinery was built over 70 years ago atop its crude source. The crude in the ground is declining.”

Shell would consider selling the refinery at a reasonable price, he said.

Shell‘s refining margins, the difference between the cost of crude oil and the price of the gasoline created, were $7.19 to $10.19 a barrel during late March for plants in the Gulf Coast and Delaware.

Refining margins for Shell‘s three California plants were at least $21.82, and Bakersfield was the most profitable at $23.01, according to the documents obtained by the watchdog group.

“This is a really major fraud on the public to close a refinery that creates 2 percent of the gas in the state,” Court said. “This evidence should also spur a national moratorium on all further domestic refinery closures.”

The watchdog group wrote state Attorney General Bill Lockyer asking him to file a lawsuit to prevent Shell from shutting down the Bakersfield refinery.

The attorney general’s office had no immediate comment on the request but hasbeen investigating the Bakersfield refinery’s closing for months to see if it raises any anti-competitive issues, said Lockyer’s spokesman Tom Dresslar.

“Our investigation will continue to be aggressive. It will be thorough,” he said. “But there’s no guarantee that this problem can be solved by law enforcement.”

Doug Abrahms is the Washington correspondent of The Desert Sun. He can be reached at (202) 906-8124

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