Washington—Today, the senators from California, Washington and Oregon asked the Department of Justice to conduct a refinery-by-refinery investigation into the cause of spikes that drove gasoline costs to greater than $4 a gallon in Western states during Might and October.
In a letter despatched to Lawyer Normal Eric Holder, the senators called on the Division of Justice’s Oil and Gas Worth Fraud Working Group to research whether market manipulation or false reporting by oil refineries contributed to close to-record gas costs on the West Coast earlier this year.
The letter was sent by Senators Dianne Feinstein (D-Calif.), Maria Cantwell (D-Wash.), Ron Wyden (D-Ore.), Patty Murray (D-Wash.), Barbara Boxer (D-Calif.) and Jeff Merkley (D-Ore.).
“We are requesting a Department of Justice investigation of doable market manipulation and false reporting by oil refineries which may have created a notion of a supply shortage, when the truth is refineries were nonetheless producing, the six senators wrote. “A McCullough Research report launched Nov. 15th in conjunction with a California State Senate hearing on California gasoline prices revealed data that showed that the value spikes in Could and October occurred whereas crude oil costs have been declining, inventories were increasing, and probably in conjunction with misleading market-making info. We hope the Justice Department and members of the Oil and Gas Price Fraud Working Group will launch a refinery-by-refinery stage probe. /p>
The letter comes on the heels of a report from McCullough Analysis indicating that some West Coast oil refineries might have been producing oil final May regardless of public reviews that they were shuttered for maintenance. The report, which was offered at a California State Senate listening to on Nov. 15, also particulars that West Coast oil inventories have been both increasing or remaining stage at historic 5-year averages during the worth spikes this yr. In addition, the national value of crude oil, the main driver of gasoline costs, was lowering in October and should, complicating market fundamental explanations for the worth spikes.
Legal professional Common Holder created the Oil and Gas Price Fraud Working Group on April 21, 2011, to explore potential manipulation, collusion, fraud or misrepresentation that harms consumers in the oil and gas markets. The Working Group includes embody representatives from the Division of Justice, the National Association of Attorneys General, the Commodity Futures Buying and selling Commission, the Federal Trade Commission, the Division of the Treasury, the Federal Reserve Board, the Securities and Trade Commission, as properly because the Departments of Agriculture and Energy.
“West Coast households and businesses are reeling from elevated and extremely unstable prices on the pump, impacting household budgets, inflation levels, and general financial activity, the Senators wrote. “We imagine this example demands the attention from the Working Group established in April 2011 specifically to “monitor oil and gas markets for potential violations of criminal or civil laws to safeguard towards unlawful shopper harm. /p>
An intensive evaluation of emissions monitoring information by McCullough found that the Chevron refinery in Richmond, Calif., emitted byproducts of petroleum manufacturing all through Could. But public experiences claim the refinery shut down manufacturing from May 12 to May 26.
In line with the McCullough report, the October value spike added up to a 66 cent-per-gallon windfall profit for oil companies—or about $25 million a day. The distinction between what drivers actually paid and what they should have paid exceeded $1 billion.
“Taken together we consider these facts paint a picture of a extremely unusual set of concurrent events in West Coast petroleum markets, the Senators wrote within the letter. “Given the hit to American families and companies from gasoline worth spikes, we urge the Working Group to use every current authority and regulation to determine, stop, and prosecute any and all situations of false reporting, manipulation, or anticompetitive habits in the West Coast petroleum wholesale markets. /p>
The complete text of the letter is below:
November 27, 2012
The Honorable Eric H. Holder, Jr.
Legal professional Common
U.S. Division of Justice
950 Pennsylvania Ave, NW
Washington, DC 20530
Pricey Attorney General Holder:
We are requesting a Division of Justice investigation of possible market manipulation and false reporting by oil refineries which may have created a notion of a supply scarcity, when actually refineries have been nonetheless producing. A McCullough Analysis report released Nov. 15th at the side of a California State Senate hearing on California fuel prices revealed info that showed that the value spikes in Might and October occurred while crude oil prices were declining, inventories had been increasing, and presumably together with misleading market-making information. We hope the Justice Department and members of the Oil and Gas Price Fraud Working Group will launch a refinery-by-refinery level probe.
In response to this new evaluation by McCullough Analysis, provide shortages following refinery fires and other unexpected outages at West Coast refineries did not trigger the Could and October gasoline value spikes. Throughout these intervals inventories had been both growing or remaining level at historic 5-yr averages during the very best worth spikes. In addition, an exhaustive assessment of California refinery emissions knowledge revealed inconsistencies between when refineries had been actually producing petroleum products and when maintenance shutdowns had been publicly reported. Probably market-making info, misleading reports of shutdowns might create or exacerbate a perceived provide shortage and artificially drive market costs to unjustifiably high ranges. If these findings are correct, which might only be confirmed by subpoenaed records, they might violate the FTC August 2009 Rule towards “false or deceptive public bulletins of deliberate pricing or output decisions, and be topic to fines of as much as $1 million a day per violation.
West Coast families and businesses are reeling from elevated and intensely volatile prices on the pump, impacting household budgets, inflation ranges, and general financial activity. We imagine this example calls for the eye from the Working Group established in April 2011 particularly to “monitor oil and gas markets for potential violations of criminal or civil laws to safeguard in opposition to unlawful consumer harm. Anomalous, uncompetitive market dynamics might have forced West Coast drivers to pay $1.3 billion more on the pump throughout the Might 2012 worth spike than they should have, according to an analysis by McCullough Analysis. Even a one cent per gallon increase in gasoline prices value California consumers an additional $150 million per yr, based on the Federal Commerce Fee (FTC).
Sadly, our constituents are all too familiar with power market schemes that manipulate provides to spice up earnings at the expense of customers. We’re still paying for larger electricity charges from the fraud perpetrated by Enron, Reliant, and others throughout the Western Electricity disaster over a decade ago. Petroleum is a key a part of our economy, yet these markets are opaque and highly concentrated making them inefficient and topic to market energy abuse. 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 legislation or cracking down on other practices that may be unlawful and hurting consumers.
It is crucial to note that because the West Coast refinery market is highly concentrated and remoted, inaccurate details about just one refinery being down can impact gasoline prices for tens of thousands and thousands of customers.
Taken collectively we imagine these details paint an image of a extremely unusual set of concurrent occasions in West Coast petroleum markets. Given the hit to American families and businesses from gasoline worth spikes, we urge the Working Group to use each present authority and regulation to establish, stop, and prosecute any and all situations of false reporting, manipulation, or anticompetitive habits within the West Coast wholesale petroleum markets.
The Working Group ought to aggressively utilize all of its members related statutory authority to treatment this example. That features the Justice Department’s authority to prevent and prosecute fraud and collusion, the FTC’s authority to prohibit fraud or deceit in wholesale petroleum markets and the reporting of false or deceptive information related to wholesale costs (42 U.S.C. 17301 – 17305); as nicely as the parallel authorities to prevent the use of any “manipulative or deceptive gadget or contrivance granted to the Securities and Alternate Commission (SEC), the Commodity Futures Trading Fee (CFTC), and the Federal Vitality Regulatory Fee (FERC)(15 U.S.C. 78j(b), 7 U.S.C. 13(a)(2), 15 U.S.C. 717c-1, and 16 U.S.C. 791a).
We commend FERC for effectively using the authority and responsibility granted by Congress in 2005 to actively police electricity and pure gasoline markets, deploying a well-certified team of consultants to oversee trading activity and analyze buying and selling information. Since January 2011, FERC has introduced more than 10 probes into alleged vitality market manipulation, together with reaching a report $245 million settlement with Constellation Vitality Group Inc., issuing a present cause order that Deutsche Bank’s energy trading unit manipulated the California power market in 2010, and just lately proposing a file $469 million penalty against Barclays Plc for power market manipulation. As of October 2012, FERC has used its 2005 anti-manipulation authority to conduct 107 investigations leading to fifty two settlements and civil penalties of $294 million and disgorgement of earnings totaling $155 million.
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