Senator Offers Proof: Oil Companies Created Shortages on Purpose

Oil companies have said that energy shortages are caused by a lack of refineries and have blamed excessive environmental regulation and local resistance for the problem. But newly-revealed oil industry documents obtained by Senator Ron Wyden show that five years ago, companies were looking for ways to cut refinery output so they could boost profits.

It takes about 4 years to build a large refinery, so they would have had to start building in the mid 1990s in order to avoid shortages now. But in the mid 1990s, according to the documents, oil companies had no interest in building new refineries and were even discussing the need to curtail refinery output in order to increase profits.

?If the U.S. petroleum industry doesn?t reduce its refining capacity, it will never see any substantial increase in refinery margins [profits],? said an internal Chevron document in November 1995. The memo mentions warnings given about refinery profits by a senior analyst from the American Petroleum Institute. API spokesman Jim Craig says, ?We don?t know about these alleged internal company memos, but the idea that API would warn member companies on profits is ludicrous.?

In a memo written in March 1996 marked ?highly confidential,? an official at Texaco said that concerns about too much refinery capacity were ?the most critical factor? facing the refinery industry, resulting in ?very poor refining financial results.?

The Texaco memo concluded that ?significant events? were required to deal with the excess refinery capacity problem and said that one solution might be to get the government to lift clean air requirements for an oxygenate in gasoline, since removal of the additive would require more gasoline to be used in each gallon of fuel, tightening supplies.

Now that refinery capacity is tight, the oil industry still wants to end the federal requirement for the oxygenate, arguing that new blends of gasoline can meet the same clean air standards.

?The documents suggest that major oil companies pursued efforts to curtail refinery capacity as a strategy for improving profit margins,? said Wyden, who released the documents at a news conference on Thursday.

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