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Oil refiners under scrutiny

Tue., June 21, 2011

FTC probing possible gas price manipulation

WASHINGTON – The Federal Trade Commission confirmed Monday that it has opened an apparently broad investigation into the companies that turn crude oil into gasoline, looking into whether they have engaged in anti-competitive practices or manipulation to drive up prices at the pump.

The agency had little to say publicly about the probe, beyond what appeared in a letter sent Monday to Sen. Maria Cantwell, D-Wash., which provided some detail about the unusual investigation.

At issue in the FTC’s probe are refining margins, the difference in value between petroleum products leaving the refinery and the price of their chief component, crude oil.

“The Energy Information Administration reported that as of early May, U.S. refiners’ margins had increased more than 90 percent since the beginning of 2011, and U.S. refiners at that time were using only 81.7 percent of their capacity, representing a 7 percent reduction from that same period in 2010,” FTC Chairman Jon Leibowitz said in the letter to Cantwell.

“In light of these and other developments,” the FTC letter said, the commission has authorized the use of “compulsory process,” which somewhat resembles subpoena power to demand records. These records could be sought, Leibowitz said, from oil producers, refiners, transporters, marketers and financial traders who operate in both the physical market where oil is delivered, and the futures market, where contracts for future delivery of oil are traded – and where seven in 10 traders will never take possession of a barrel of oil.

Peter Kaplan, a spokesman for the FTC, said “we are going to decline to comment” beyond the letter sent to Cantwell.

Because refining was so profitable during a period of low utilization of the nation’s total refinery capacity, there’s the appearance that supply was deliberately limited to create artificial scarcity of gasoline. The American Petroleum Institute earlier this year told McClatchy Newspapers that refiners are simply more productive, squeezing ever greater amounts of product out of the same barrels of crude oil.

The National Petrochemical and Refiners Association – the lobby for refiners – expressed confidence in a statement to McClatchy that its members will be cleared of any wrongdoing.


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