Congress investigates gas pricing

WASHINGTON -- Oil industry executives rejected charges Tuesday that they manipulated gasoline supplies to increase prices. A senator said there is strong evidence that oil companies work to maintain tight markets that produce price spikes.

Opening a hearing on the volatility of gasoline prices, senators said oil industry practices of maintaining low inventories, along with growing market concentration, invited the sudden gasoline price surges that have occurred in recent years.

"Price spikes are becoming a way of life . . . and not without serious consequences," Sen. Carl Levin, chairman of the Senate Permanent Investigations Subcommittee, told the oil executives.

Levin cited the findings of a subcommittee report that charged refiners had withheld supplies to force up gasoline prices during tight markets, including a 1999 BP Amoco memo that gives a blueprint of actions that might be taken to maintain high prices. Levin said the "outrageous" internal memo considered by senior executives at BP Amoco, now known only as BP, outlined a series of actions that could be taken to maintain high prices in the Midwest, including shipping gasoline to Canada or getting other refiners not to ship fuel into the region.

Ross Pillari, BP's vice president for marketing, called the recommendations inappropriate and said that they were not adopted. He said people who wrote the memo had been "counseled."

"They were rejected and never went anywhere," Pillari said of the suggested proposals to influence supplies and gasoline prices.

Other oil company executives told the subcommittee that recent price spikes simply reflect market conditions and that refineries have worked aggressively to maintain supplies in a tight market.

"There has not been any conspiracy," said David Reeves, president of North American Products at ChevronTexaco Corp.

The report, released Monday, concluded: "In a number of instances, refiners have sought to increase prices by reducing supplies."

Levin acknowledged the investigation "did not discover any evidence of collusion," but he argued that gasoline markets are so "highly concentrated . . . you don't need collusion to have a big artificial impact on supply" and, in turn, prices.

The Senate report also said that in spring 2000, when prices soared past $2 a gallon, Marathon held back some of its cleaner burning, reformulated gasoline from the market "so as not to depress prices." The report cited one internal Marathon e-mail that warned that if the company unloaded too much of its gasoline it could "thrash the market."

Gary Heminger, president of Marathon Ashland Petroleum, said allegations that his company had withheld supplies were untrue.

"Marathon produced 33 percent more RFG (reformulated) gasoline than the year before and we sold every drop. . . . Any assertion to the contrary is just plain wrong," Heminger told the senators.

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