The Exxon Gas Price Spike?

American motorists have recently gone through a bipolar gasoline market. From the heights of a national average gas price of $3.49 per gallon on March 8th of 2014, $2.18, a month ago, to $2.45, today.  But such gyrations don’t reflect the huge difference in prices from state to state, especially in the last few weeks, California bearing the brunt of it.

California on March 8th topped off at $3.43 per gallon, with the national average at $2.45 and Wyoming’s tiny market spending a mere $2.14 a gallon. I believe that this disparity is no accident and primarily relates to price manipulation in a gold-mine state that consumes more fuel than any other, and with special refined fuel requirements, can rather easily be set up for oligopolistic control.

Consider a profit motive orchestrated through billions of dollars worth of accountants, lobbyists, economists, political action groups, directed by executives who must earn huge profits and award sizable dividends to stockholders who want to see the value of their stock soaring. In turn they command million dollar bonuses and lush benefits. No doubt the motivation is there.

Plutocrats, especially energy tycoons have controlled our governments at all levels for so long that a poverty of ethics, as long as undetected or willfully unseen, seems to be standard fare. Remember Enron? Why else would Enron Corporation, whose CEO was friends with George W. Bush and his family, deliberately create real and imaginary shortages during the 2000-2001 California energy crisis, in order to drive up prices and garner vast profits in California’s deregulated energy market. Enron defrauded California out of billions.

Major oil companies in 2015 have the power and the means to control markets. California energy consumers are again paying high prices for energy during the last several weeks. Shortages seem to be perpetrated by the closure of two refineries that we know of: Exxon Mobil Refining and Supply Company in Torrance, CA and Tesoro Refining and Marketing Company in Martinez, CA.  Together they account for almost 16% of refinery capacity in California. In fact, just five giant companies, Chevron, Shell, Exxon/Mobil, Phillips 66, and Tosoro refine 88% of California’s gasoline.

On February 20th, 2015, the Exxon refinery in Torrance was offline for unplanned maintenance for two days when a different piece of equipment exploded, causing considerable damage, erupted into a fire while shaking the neighborhood and raining debris nearby. Reports of the mishap signaled that the accident could cause gas price spikes only in California because the state uses a unique blend of gasoline for the summer months. The Torrance shutdown was joined by the Tosoro Martinez refinery.

Exxon, Chevron, and Conoco Phillips are in a position of power as national sellers of crude to the tune of a combined 1 trillion gallons last year.  Such control of the market is a sure recipe for impacting prices through collusion with other energy giants and manipulation of supply; for California, supply bottlenecks are usually through the refinery process.

As usual public officials are doing the usual clamoring for investigation of gas price manipulation, but we all know that nothing will come of it. It is just the usual “outrage” posturing for voter attention.

A series of outright frauds and money grabs have been seen in the last twenty or thirty years – each should have informed us about deregulation, greed, and fraud: the S & L debacle which bilked Americans of billions in the 1980s; the Enron episode signaled how corrupt for-profit companies can be in the 2000-2001 time frame; The Wall Street derivative fraud that brought about the Great Recession and eliminated middle class nest-eggs to the tune of billions of dollars.

If this history hasn’t informed us about our vulnerabilities to exploitation, what will? Also remember that monolithic corporations are even larger and mightier than they ever have been.

Am I being cynical, or even worse, paranoid? You be the judge.

The headlines are replete with “overreach,” or conspiracy: Obama’s overreach concerning Immigration reform executive orders, Hillary Clinton’s private email scandal as a conspiracy to hide dastardly deeds. You notice that while the corporate media is drowning the airwaves with these speculative stories, not much is said about big business shenanigans or the latest Koch brother committee to shuttle democratic principles. Meanwhile, Californians are bitching about paying a dollar more per gallon than the national average.

Consider simple economics. Monolithic companies like Exxon Mobil play the numbers game in terms of profit. Let’s give a hypothetical example.

Suppose an Exxon economist pointed out that a bottleneck of supply in California could easily be managed by creating a refinery crisis since four of their compatriots join them in controlling 88% of refinery capacity in California. Also consider that companies oversaw a 20% reduction in California refining capacity from 1985 to 1995 by closing 10 California refineries. Was that cost-savings, oligopolistic control or both?

Take a couple of refineries offline and gas flow falls 16%. Add problems with conversion to California’s unique summer blend and you can claim a much greater constriction in supply.

Then there was the February 20th Torrance explosion. Now no one would say or think that the explosion was perpetrated, but safety violations are so common and unattended so long that infrequent inspections and violations produce fines of a few thousand dollars while one dollar a gallon spikes in gas prices produce a few billion dollars more in profit in a few months in California alone. Way back in 2011, shortly after the Wall-Street produced recession hit, Californians were using over seven billion gallons in the first six months of that year. It is probably up to near ten billion today.

Be wary and be informed. Remember we are like fat chickens in Exxon’s hen house, and the oligopolistic control is not just in California but is increasingly becoming global in scope.

Do you feel the breeze?

James Hoover is a recently retired systems engineer. He has advanced degrees in Economics and English. Prior to his aerospace career, he taught high school, and he has also taught college courses. He recently published a science fiction novel called Extraordinary Visitors and writes political columns on several websites. Read other articles by James.