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FTC may investigate plan to shut refinery

By Elizabeth Douglass
Los Angeles Times

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In a letter Wednesday to the chairman of the Federal Trade Commission, Sen. Ron Wyden, D-Ore., asked the agency to determine whether Shell's plan to close the refinery Oct. 1 "will create further anti-competitive problems in West Coast gasoline markets, such as raising prices or restricting supply."

FTC spokesman Mitch Katz said the commission had received the letter. "We'll take a look at it and determine what our response should be," he said.

Even with the Bakersfield refinery in operation, the price of regular gasoline in California has jumped more than 27 cents in the last seven weeks to an average $1.868 a gallon, according to a survey released Monday.

Some worry California retail prices could soon surpass last year's record average of $2.145 per gallon, hit on March 17.

Mergers and refinery closures have left California with a precarious gasoline market, in which supply and demand are barely balanced, price spikes are frequent and four companies control 70 percent of the state's gasoline production.

West Coast refineries are largely interdependent, so when a price increase hits California, Washington state refineries often divert gasoline supplies to San Francisco or Los Angeles.

That diversion reduces supplies for the Pacific Northwest, including for Wyden's constituents in Oregon, and triggers higher pump prices in the region.

Wyden, a frequent oil industry critic, urged the commission to consider Shell's decision to shutter its refinery in the context of the recent FTC-approved mergers. Critics say those mergers have given a handful of players the power to boost prices and profits through their control of gasoline supplies on the West Coast and elsewhere.

Three months ago, Shell said it would close the Bakersfield plant because nearby oil fields are producing less of the molasses-like crude that feeds the refinery.

Wyden questions that explanation, citing increased drilling in the same area by ChevronTexaco.
 
Given the recent flurry of refinery purchases in the United States, Wyden has asked why Shell never tried to sell the plant before opting to shutter it.

"We haven't changed our position," Shell spokesman Cameron Smyth said.

"Ultimately, the decision to close the refinery is based on the continuing decline in San Joaquin heavy crude."

Separately, Shell Oil's parent company, Royal Dutch/Shell Group, faced a fresh setback yesterday in its campaign to regain investors' confidence after federal regulators launched a formal investigation into the company's overstatement of its oil and gas reserves.

The Securities and Exchange Commission has upgraded an informal inquiry into Shell's surprise announcement Jan. 9 that it was downgrading 20 percent of its proved reserves and reclassifying them into less certain, unproved categories.

The announcement worried shareholders and led some of them to call for the resignation of the company's chairman, Sir Philip Watts.

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