SantaMariaTimes.com: Keeping gas prices up there: "state and federal agencies are looking into Shell's reasons for closing the Bakersfield plant"

Wednesday, June 23, 2004

It was reported Monday that Shell Oil Co. has plans to reduce production at its Bakersfield refinery - just in time for California's busiest summer vacation driving period.

Shell officials deny that any cutbacks are planned, which did not prevent several elected officials and consumer groups from suggesting Shell is slowing production in an effort to boost prices, and therefore profits.   

There is another possible explanation for Shell considering a slowdown in production months before its announced date to close the Bakersfield refinery, and it also has to do with profits. Shell may need the extra cash to pay for a ghastly mistake made in southern states about a month ago.

More than 500 gas stations in the South, most of them selling Shell gasoline, had to be temporarily shut down when it was discovered that fuel with too much sulfur content was being dispensed. The tainted fuel caused fuel gauge failure in thousands of vehicles. Within days of selling the bad gas, Shell and several other companies were deluged with complaints from motorists who were having to pay from $400 to $600 or more for fuel gauge repairs.

Shell and the other companies now are on the hook for the cost of those repairs. Their plight provoked one Internet wag to offer the following comment: "The latest news: Mississippi Delta flooding blamed on drooling lawyers."

So, it is clear Shell has a motive to cut production, thus forcing up prices, and it is highly suspicious that any oil company would want to close a refinery whose $11 million profit in May alone was more than 50 times what the company expected. Shut down a business with a stellar performance like that? Unlikely, even in the zany, convoluted world of oil pricing.

In fact, both state and federal agencies are looking into Shell's reasons for closing the Bakersfield plant. Shell officials say it's because they want to shift production to the more-modern, better-equipped refinery in Martinez, but company documents show Martinez to be operating close to capacity - and turning a nifty profit as well.

Meanwhile, if internal planning memos are to be believed, the company apparently intends to go ahead with production cutbacks at Bakersfield, and possibly at Martinez, in July and August.

In other words, don't look for price relief at the gas pump anytime soon.