Evidence Shows Shell to Demolish Profitable Refinery, Drive Up Gas Prices;

releases.usnewswire.com ^

[chance33_98]

Evidence Shows Shell to Demolish Profitable Refinery, Drive Up Gas Prices; Consumer Group Seeks Intervention of Bush, Kerry, CA Attorney General

4/6/2004 9:30:00 AM

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To: National and State Desks, Consumer Reporter

Contact: Jamie Court, 310-392-0522, ext. 327 or Tim Hamilton, 360-495-4941, both for the Foundation for Taxpayer and Consumer Rights

SANTA MONICA, Calif., April 6 /U.S. Newswire/ -- The Foundation for Taxpayer and Consumer Rights today released internal Shell documents showing the oil refiner is set to close and demolish its Bakersfield refinery despite the fact the site had the biggest refinery margins, or profits per gallon, of any Shell refinery in the nation as of yesterday.

Shell had claimed it was not economically viable to keep the refinery open and has refused to put it up for sale. Bakersfield supplies 2 percent of the state's gasoline and only 13 refineries feed California's tight gasoline supply (down from 37 in 1983).

An April 5th internal Shell document released today by FTCR shows that Bakersfield's refining margin at $23.01 per barrel, or about 55 cents profit per gallon, topped all of Shell's refineries in the nation. That means, for example, that margins are 36 cents per gallon higher in Bakersfield than in Port Arthur, Texas. The internal document comments under the category of refinery margins "Wow."

"Only an oil company that wants to short the market and artificially drive up the price of gasoline would demolish a highly profitable refinery rather than sell it," said Jamie Court, president of FTCR and author of the book Corporateering (Tarcher/Putnam). " Shell has deceived the public about Bakersfield and must be forced to keep this refinery open or sell it to a competitor. This evidence should also spur a national moratorium on all further domestic refinery closures."

In a letter sent today, FTCR called upon California Attorney General Bill Lockyer to file suit under the state's Unfair Business Competition Law to force Shell either to sell the refinery or to keep it running. The consumer group said it could seek such legal relief itself should the Attorney General not act. The letter can be read at http://www.consumerwatchdog.org/utilities/fs/fs004156.php3 and the Shell documents can be viewed at http://www.consumerwatchdog.org/utilities/rp/

FTCR also wrote President Bush and US Senator John Kerry to ask both candidates to support a national moratorium on refinery closures throughout the United States, stating that the recent run up at the pump "has little to do with OPEC but is a result of the deliberate restriction of supply by the highly consolidated domestic refining industry." The letter can be viewed at http://www.consumerwatchdog.org/utilities/fs/fs004155.php3

Among the documents released today by the consumer group is an end-of-2003 memo from Shell manager Jeff Krafve to fellow refinery employees that describes Bakersfield's refining operation this way: "(W)e turned in excellent operational performance this year. We are the most reliable US Shell refinery in 2003, and achieved world-class performance two years in row now. We have made quantum step improvements in our environmental compliance, finishing well under target again for the second straight year. We have reduced the expense we control 15-plus percent year over year, and have been one of the few Shell U.S. refineries to turn a profit... We've done this with the lowest personnel index in Shell refining in the country, making us comparatively the most productive and effective workforce in the system."

FTCR's letters to Lockyer, Bush, and Kerry also reveal, "Refinery workers in Bakersfield told FTCR that Aamir Farid, General Manager of Shell's refinery, stated to hundreds of employees at an employee meeting that the company would never sell the refinery because it did not want the competition. This suggests the real motivation for the company to close the refinery is to insure its production does not stay on line and to further decrease competition for the company's remaining two refineries in California."

In addition, FTCR uncovered a timetable showing decommissioning and demolition are set to begin immediately after the refinery's shut down date. Court and petroleum consultant Tim Hamilton -- both members of the Attorney General's Gasoline Pricing Task Force -- wrote to Lockyer, "As the bulldozers are apparently on their way to Bakersfield, time is of the essence."

The letter to Lockyer also states: "This market obviously functions like no other. If there were a computer shortage, would any computer maker close computer factories? At last, we believe there is an opportunity for you to act under the state's Unfair Business Competition Law to stop Shell's plan to demolish its refinery and to prevent gasoline prices from spiking once again."

The letter to Bush and Kerry ends: "Together you have an opportunity to stop Shell from closing this refinery and to maintain the nation's refining capacity by calling for a moratorium on all refinery closures in the United States. It's the right thing to do not only for Americans' bank accounts, but also for our national security."

http://www.usnewswire.com/

[umgud]

If Shell was closing a refinery just to drive up the market, I'd suspect they'd close one that was less profitable. There must be other reasons involved.

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[Bikers4Bush]

And yet there are those who still don't believe that the oil companies are A.) making boatloads of money and B.) creating these shortages the same way yhe electric companies create them by closing down power plants for "routine maintenance".

Idiots.

[elli1]

The refinery is 70 years old so I suppose there is a lot more to the story than is being reported in this article.

http://www.washtimes.com/upi-breaking/20031113-035838-4534r.htm

[traumer]

Bad Big Oil Companies !

[Hillarys Gate Cult]

I'm guessing that just doing business in California is one major factor. All of the goofy enviormental fines aren't counted in the final total in this article.

[Bikers4Bush]

Do you mean like this specific piece about optimizing their portfolio?

"While the decline in crude availability has been the major factor in the timing of this decision, this closure is just one part of an overall effort to optimize our portfolio," said Lynn Elsenhans, CEO of Shell Oil Products U.S.

[eddie willers]

Shell has deceived the public about Bakersfield and must be forced to keep this refinery open or sell it to a competitor.

[null and void]

Frankly, I'm surprised they aren't shipping the whole thing to China.

[Bikers4Bush]

So how then can you justify demolishing an asset that you could sell?

The barriers to entry in this industry are massive. Not just any slob can build a refinery. They would stand to make money by selling it but to do so would mean giving a competitor additional market share.

If you think that they would not intentionally do this you're living in a dream world.

[SolidSupplySide]

What is the accusation here?

It seems that Shell's critics are saying that Shell is closing its most profitable refinery in order to fleece the consumer.

Anyone who believes this argument is an idiot.

[Quix]

If there was ever a corporation in bed with the puppet masters, it must be Shell.

[Bikers4Bush]

The company I work for has purchased smaller companies with their own plants and then shifted all of the production to our own facilities or in some cases shifted production to the new plants we've purchased and shut down less productive plants of our own.

Twice there were buyers for old facilities. One was demolished and the other remains idle today. Why? Because it wouldn't make sense to allow someone else to buy the plant and give them the ability to compete. The company will not even accept bids for the idle facility from anyone who intends to start it up again and use it to make what we make (which is the only thing it's good for since retrofitting it would be as costly as building new in most cases).

Mind you what we produce is not even remotely as important to the country as gasoline so to think that the oil companies would not do something like this is at the very least naive.

[The_Repugnant_Conservative]

If the barriers to market entry weren't so high people might actually build new refineries in CA, and they would actually have a capitalist market. But their own environmental laws and activists grant the existing facilities a monopolistic competition with their exorbitant barriers to market entry.

As for closing the plant and not selling. A property that held a refinery for the past 70 years is likely not sale-able. The cost to cleanup the soil may be more than the parcel is worth. And a facility operating at high profit margins could represent that all the equipment has been fully amortized, hence old.

Still it might well be profitable to tear down the existing facility and rebuild. Unless there are additional barriers which would make this non feasible as well.

[biblewonk]

Evil corporations, just like my new best friend says, ping.