By Alex Yap
Six West Coast senators penned a letter to U.S. Attorney General Eric Holder on Tuesday asking him to consider whether or not shady practices by oil refineries are responsible for the 2012 gasoline price increases.
Maria Cantwell (D-WA), Ron Wyden (D-OR), Dianne Feinstein (D-CA), Patty Murray (D-WA), Barbara Boxer (D-CA), and Jeff Merkley (D-OR) sent a request to the Department of Justice to launch an investigation into what they call “market manipulation and false reporting by oil refineries.”
According to a report by McCullough Research, West Coast gas prices spiked in May even though the price of world oil was falling. Just five months later, gas prices in California increased amid rumors of a gasoline shortage.
The McCullough Research analysis shows that the May and October price increases may not have been caused by supply shortages, refinery fires, and unexpected outages as was previously believed. Rather, oil “inventories were either increasing or remaining level at historic five-year averages” during that time.
The senators argue that misleading reports may have caused or exaggerated the perception of a supply shortage and “artificially [driven] market prices to unjustifiably high levels.”
“Because the West Coast refinery market is highly concentrated and isolated, inaccurate information about just one refinery being down can impact gasoline prices for tens of millions of consumers,” the senators wrote.
According to the Federal Trade Commission, an increase of just one cent per gallon in gas prices cost California drivers an extra $150 million per year.
The senators asserted that the market dynamics “may have forced West Coast drivers to pay $1.3 billion more at the pump during the May 2012 price spike than they should have.”
The only way to confirm suspicions would be to gain access to the oil companies’ subpoenaed records, the senators wrote. Should an investigation prove the oil refineries provided false or misleading information in order to inflate prices, the companies could face fines of $1 million per day the violation occurred.
“Given the hit to American families and businesses from gasoline price spikes, we urge the Working Group to use every existing authority and regulation to identify, stop, and prosecute any and all instances of false reporting, manipulation, or anticompetitive behavior in the West Coast Wholesale petroleum markets,” the senators wrote.