Memos Show Oil Companies Closed Refineries To Hike Profits

If you believe the oil industry's response to Katrina, you'd think demanding environmentalists are to blame for $3 per gallon gasoline because the tree huggers shut down refineries with tough new rules. President Bush even mimicked the industry excuse by waiving environmental standards in the wake of Katrina. Well, the industry's own internal memos show the intentional shrinking of American refinery capacity in the 1990s was the oil companies' own idea to pump up profits.

Take this internal Texaco strategy memo: "[T]he most critical factor facing the refining industry on the West Coast is the surplus of refining capacity, and the surplus gasoline production capacity. (The same situation exists for the entire U.S. refining industry.) Supply significantly exceeds demand year-round. This results in very poor refinery margins and very poor refinery financial results. Significant events need to occur to assist in reducing supplies and/or increasing the demand for gasoline." The memo went on to discuss a sucessful campaign in Washington State to shrink refined supply by removing other additives in the gasoline that filled gas volume.

Another Mobil memo shows the company promoted tough regulations in California to shut down an independent refiner. A Chevron memo acknowledged the industry wide need to shutter refineries and discussed how refiners were responding in kind.

Large oil companies have for a decade artificially shorted the gasoline market to drive up prices. Oil companies know they can make more money by making less gasoline. Katrina should be a wakeup call to America that the refiners profit widely when they keep the system running on empty. It's time for government to regulate the industry's supply. The fact that President Bush received $2.6 million from the oil industry for his reelection in 2004 should make regulation of the nation's gas supply one of the Democrats' most important talking points.