By Roberta Rampton
WASHINGTON, Nov 27 (Reuters) - Six U.S. senators on Tuesday
called for the U.S. Justice Department to investigate whether
market manipulation by West Coast oil refiners contributed to a
price spike in May and October that sent gasoline prices to
record highs above $5 a gallon.
The senators, all Democrats, want the Justice Department to
conduct a "refinery-by-refinery probe" and subpoena records from
California refineries to see whether public reports of
maintenance shutdowns were accurate. Two of the state's largest
refiners are Valero Energy Corp and Tesoro Corp.
"We are requesting a Department of Justice investigation of
possible market manipulation and false reporting by oil
refineries, which may have created a perception of a supply
shortage when in fact refineries were still producing," the
senators said in a letter to U.S. Attorney General Eric Holder.
"We will review the letter and respond accordingly," said
Justice Department spokeswoman Adora Andy.
California, the most populous U.S. state and also the
biggest gasoline market, is largely cut off from U.S. national
pipeline and refinery networks and thus more subject to supply
and price disruptions.
The senators cited a report from independent energy
consultant Robert McCullough that said two West Coast refineries
continued to operate throughout May despite reports they were
shut for maintenance.
A report issued on Nov. 15 by McCullough Research found that
during gasoline price spikes in May and October in California,
when drops in production were being blamed for the increases,
gasoline inventories actually rose across the state, home to the
nation's largest gasoline market.
"An exhaustive review of California refinery emissions data
reveals inconsistencies between when refineries were producing
petroleum products and publicly reported maintenance shutdowns,"
the report said.
The California gasoline market has been rocked by a series
of refinery mishaps, including an Aug. 6 fire that shut down the
key crude refining unit of Chevron Corp's 245,000 barrel-per-day
plant in Richmond and a reported power failure on Oct. 1 at
Exxon Mobil Corp's 149,500-bpd Los Angeles-area refinery in
On Oct. 5, Reuters, citing sources, reported that a "short
squeeze" in trading markets may have played a role in an
unprecedented wholesale price increase of almost $1 a gallon for
California-grade gasoline. California's two Democratic senators
-- Barbara Boxer and Dianne Feinstein -- have both cited the
Reuters report as cause for further investigation.
Valero, the nation's largest refiner, said past
investigations into alleged gasoline price manipulation have
consistently come up empty, and that unique factors make the
California gasoline market vulnerable to price spikes. Those
include boutique blending requirements that make it nearly
impossible to import supply from outside the state, said Valero
spokesman Bill Day said on Tuesday.
"The self-inflicted factors that contributed to the
temporary price increase in California remain in place," Day
said. "You don't need a federal investigation to figure that
Tesoro said its refining system "allowed us to bring
additional gasoline supply to the Southern California area
during the recent supply shortage, when it was needed most." The
company declined to comment on gas prices or the potential for a
Justice Department investigation, spokeswoman Tina Barbee said.
The letter said the Justice Department and its Oil and Gas
Price Fraud Working Group need to make sure the market is free
from price manipulation.
It was signed by senators Maria Cantwell and Patty Murray of
Washington, Feinstein and Boxer of California, and Ron Wyden and
Jeff Merkley of Oregon.
"While we applaud the Working Group for convening in April
2011, we see scant evidence that its members are policing these
markets as required by law or cracking down on other practices
that may be illegal and hurting consumers," the senators said.
(Additional reporting by Erwin Seba)
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