Doesn’t Oil Mean Swindle?

AP Analysis: Firms Crimping Oil Supplies
Published on Sunday, November 26, 2006.

BAKERSFIELD, Calif. (AP) — You’d think it was Texas. Dusty roads course the scrubland toward oil tanks and warehouses. Beefy men talk oil over burritos at lunch. Like grazing herds, oil wells dip nonstop amid the tumbleweed – or even into the asphalt of a parking lot.

That’s why the rumor sounded so wrong here in California’s lower San Joaquin Valley, where petroleum has gushed up more riches than the whole gold rush. Why would Shell Oil Co. simply close its Bakersfield refinery? Why scrap a profit maker?

The rumor seemed to make no sense. Yet it was true.

The company says it could make more money on other projects. It denies it intended to squeeze the market, as its critics would claim, to drive up gasoline profits at its other refineries in the region.

Whatever the truth in Bakersfield, an Associated Press analysis suggests that big oil companies have been crimping supplies in subtler ways across the country for years. And tighter supplies tend to drive up prices.

The analysis, based on data from the U.S. Energy Information Administration, indicates that the industry slacked off supplying oil and gasoline during the prolonged price boom between early 1999 and last summer, when prices began to fall.

The industry counters that it’s been working hard to meet untiring demand. It faults output quotas set by Mideast oil powers, global competition for oil from booming economies like China’s, and domestic challenges like depleting wells, clean-air rules, and hurricanes. They do make things harder.

Read it here.

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