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May 07, 2004 - 12:00 PM

Pumping Up The Price Of Gasoline

by Jamie Court
Perhaps no issue affects more businesses in California now than the skyrocketing price of gasoline. But Arnold -- big business's biggest advocate -- has been remarkably silent on the inflation at the pump, which is being identified as one of the biggest job killers, stock killers and profit killers there is.

The cause of the recent run-up is not OPEC crude prices, or California's gas prices would not be 50 cents higher than the rest of the nation, where crude costs are the same. The culprit in California is limited refining capacity and low inventories. California's 5 big refiners, who control 90% of the gas supply, have reduced the number of refineries from 37 in 1983 to 13 today. That's because when supplies of a commodity are artificially limited, like during California's electricity crisis, the price goes sky high. First quarter profit reports from the big 5 refiners show that the West Coast refining operations are yielding huge profits -- which means the price run-up is not passed-on crude costs but pure profits. (See

What can Arnold do? He can get involved in what is becoming a national campaign to prevent Shell from demolishing its Bakersfield refinery this fall -- a refinery that supplies 2% of the state's gasoline and 6% of its diesel. Recently US Senator Boxer, US Senator Ron Wyden and Attorney General Lockyer have called on Shell to sell the refinery or keep it running (see Boxer's correspondence at A National Public Radio story discussed state geologists' contention of Shell's claim that there is not enough local crude to keep the refinery running (listen at Internal Shell documents show the Bakersfield refinery is in fact the most profitable Shell refinery in the system (see

Where's Arnold? Receiving private counsel from his chief of staff Patricia Cleary, a former Chevron lobbyist? Dining with big donors like Chevron/Texaco, Occidental Petroelum and ConocoPhillips (76)? Arnold should be standing up for price-gouged drivers, businesses and the economy by making sure that Shell is forced to sell its refinery in Bakersfield on reasonable terms rather than blow it up in the tightest gasoline market in history, as it is scheduled to do. Permitting artificial manipulation of the energy supply to drive up prices is bad for business. And for governors… just ask Gray Davis.

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