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Thomas Elias writes in the Los Angeles Daily News that just one week before many California motorists began paying upwards of $4.30 per gallon for gasoline, oil tanker Teesta Spirit left Los Angeles headed for ports on the west coast of Mexico carrying more 300,000 barrels of gasoline refined in California. At a time when oil companies were raising prices by as much as $1 per gallon in some regions, oil companies like Chevron and Phillips 66 shipped about 100 million gallons of gasoline out of California. "Oil refiners have kept the state running on empty and now they are sending fuel refined in California abroad just as the specter of low inventories drives huge price increases," says Jamie Court, president of the Consumer Watchdog advocacy group.
According to Elias as the oil companies were shipping out that fuel, they reaped unprecedented profits reportedly approaching $1.50 for every gallon of gasoline they sold at the higher prices. "Gasoline prices are determined by market forces, and individuals who understand how commodity markets work have recently testified that those markets are working as they should," responded Catherine Reheis-Boyd, President of the Western States Petroleum Association, to charges of price gouging. "All of the many government investigations into gasoline markets in recent years have concluded that supply and demand are the primary reason gas prices go up and down." Kathleen Foote, who heads up the antitrust division at the California attorney general's office, agreed that the industry operates like an oligopoly in the state. But proving price fixing is difficult in a field where only a few players exist. "This system is made to break because oil refineries keep it running on empty," concludes Court. "They have every incentive to create a price spike like this."
(Score: 3, Interesting) by davester666 on Wednesday July 29 2015, @07:26AM
This is exactly what the electric companies do as well.
Here in Alberta, one of our energy companies just got a token fine for repeatedly doing "routine maintenance" on one of their power plants during peak hours, resulting in them making more money than if that power plant remained online.
And the refinery companies are blatantly doing this. There is a oil glut in North America [it's why Oil Sands oil is so cheap and we want to ship it to the coasts to export, US refineries around us claim to be oversupplied, so they don't pay anywhere near the price of oil (even allowing for the extra refining needed for our oil)].
And there is no policy you can implement to get someone else into the market [that can materially make an impact], because all the major existing players tell anybody planning to build a new refinery "good luck with that. we'll undercut your prices until you sell out to us, and we can do it indefinitely because our refineries are all paid for".
When there is a high barrier to entry and a limited number of competitors, they all make the most money by....charging the same high rate as everyone else.