Motorists are understandably frustrated by the volatility of prices at the pump. It’s not surprising that they sometimes wonder if there’s any truth to speculation about oil company conspiracies to manipulate gasoline prices.
But experts who closely follow fuel markets and understand supply contracts, future markets and options know that fluctuating gasoline prices merely reflect the dynamics of supply and demand.
It’s disappointing when individuals such as Robert McCullough, a self-described expert in energy markets but with little understanding of gasoline markets, offer theories suggesting sinister motives and illegal conduct when the evidence clearly points to neither (“Bill focuses on manipulation of gas prices”; Viewpoints, Aug. 31).
For almost a year McCullough has promoted a report he claims substantiates his theory that oil-company supply manipulation – not refinery and pipeline upsets or fuel supply shortages – created recent price spikes in California.
At the request of the Western States Petroleum Association, Stillwater Associates analyzed McCullough’s research and discovered many of his conclusions were based on inaccurate descriptions of the market, incorrect interpretations of information and incorrect measures for his analysis of gasoline inventories and prices.
McCullough’s findings directly contradict the California Energy Commission’s conclusion that there were in fact strong correlations between changes in prices and a series of outages at refineries in California and Washington, as well as a pipeline incident that further interrupted supply.
The ultimate proof came when supplies were restored and prices came down sharply.
The conduct of oil companies has been investigated dozens of times over the past several decades without finding any evidence of wrongdoing. Government agencies have consistently concluded supply and demand are the determining factors behind gasoline prices. And market conditions, including the nation’s highest fuel taxes, unique product specifications, tough air quality standards and relative isolation from other refining centers, generally account for California’s fuel prices being higher than elsewhere.
Now McCullough – from Oregon – is promoting a bill in the California Legislature that would create a new bureaucracy to investigate allegations already disproved by every credible agency charged with oversight of gasoline markets.
McCullough opines, “Oil companies are quick to point the finger at supply and demand, oil markets or the state’s clean air laws as causes for recent spikes, but don’t be fooled. These reasons merely serve as smokescreens to a much larger problem facing consumers at the pump – potential price manipulation.”
But the fact is that there is neither research nor credible evidence pointing to price manipulation of gasoline markets in California.
David Hackett is president of Stillwater Associates LLC, a transportation energy consulting company headquartered in Irvine.