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Oil market manipulation alleged

Saturday, January 10, 2009

Accusations that a big oil company is trying to manipulate California’s gasoline market are swirling around a Bakersfield refinery whose owner filed for bankruptcy late last month.

Flying J, owner of the Big West refinery, filed for Chapter 11 protection on Dec. 22 and reported that it was closing the plant for maintenance. But a memo written Thursday by a union official at the plant said “the refinery is out of Crude oil” and blamed Shell Oil for closing a pipeline that brings crude into the plant, effectively starving it of raw material.

Shell used to own the refinery and threatened to close it in 2004, saying it wasn’t profitable. California politicians, however, suspected Shell was trying to reduce the state’s gasoline supplies to drive up the price, and they pressured Shell to sell the plant instead.

Those suspicions resurfaced Friday, with Sen. Barbara Boxer asking California Attorney General Jerry Brown to investigate the union memo’s accusations.

“The Big West Refinery supplies our state with 2 percent of its gasoline and 6 percent of its diesel fuel, and in these tough economic times, Californians can’t afford high gas prices stemming from refinery closures,” Boxer, D-Calif., wrote in a letter to Brown, who said he would “take a hard look at the situation.”

A Shell spokeswoman said Friday that while her company was no longer shipping oil to the refinery, other oil suppliers were free to use the pipeline. In addition, the refinery draws crude from another pipeline not owned by Shell, said spokeswoman Alison Chassin. Flying J owes Shell money for crude already delivered to the plant, an amount she said was in the “tens of millions” of dollars.

With the refinery closed, Shell has had to scramble to find other sources of gasoline for Shell gas stations in the Bakersfield area. Accusations that Shell is trying to manipulate the gas market are unfounded, Chassin said.

“The closure of the Bakersfield refinery is absolutely not in our interest,” she said.

This article appeared on page C – 1 of the San Francisco Chronicle

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