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FACTSHEET

Letter To Gov Schwarzenegger About Flexing Power On High Price of Gas

May 27, 2004

Governor Arnold Schwarzenegger
State Capitol
Sacramento, CA 95814

RE: Flex Your Power Over Shell's Closure of The Bakersfield Refinery

Dear Governor,

As Memorial Day weekend approaches, the price of gasoline in California continues to be at least 25 cents higher than in the rest of the nation. Three dollar per gallon gasoline is quickly becoming a reality due to the reduced refining capacity in the state and the stranglehold of the five major oil refiners that control almost 90% of the state's gasoline supply.

Your only statement on the high price of gasoline, released yesterday, is that consumers should "flex their power at the pump" by taking steps such as keeping tires inflated to the recommended pressure, using air conditioning selectively, and observing posted speed limits.

Governor, you are hardly the most appropriate voice for conservation given that you drive the least fuel efficient vehicle on the planet and led the drive to bring the Hummer to the popular market. More importantly, your silence on the imbalance of power between refiners and motorists leading to price gouging of motorists on the West Coast is one reason oil companies continue to rob motorists blind at the pump. You have refused to flex your own power to force refiners to play fair, keep sufficient inventories and maintain existing refining capacity.

First quarter reports from major refiners show that profit margins at California refineries are higher than in the rest of the world. The reason is that refiners have artificially reduced the supply of gasoline in order to inflate its price on the commodities market -- where gasoline prices increase when inventories decrease. California had 37 refineries in 1983 and now has only 13 refineries that make conventional gasoline. Shell Oil is poised to close its Bakersfield refinery in October and that would take off line another 2% of the state's gasoline supply -- leaving California with only 12 refineries producing conventional gasoline.

Shell acknowledges it has no plans to replace the lost fuel. If allowed, such a depletion of inventories will further drive the price of gasoline up on the commodities market, which I believe is Shell's goal. Internal documents from Shell show the Bakersfield refinery is the most profitable in the world for Shell. Shell is not merely closing the plant, but has plans to demolish it rather than sell the facility. You should call upon Shell to keep this refinery open.

Other pubic officials have weighed in to stop the closure of the Bakersfield refinery. Attorney General Lockyer yesterday hired a consultant to assess the property and handle its sale. US Senator Barbara Boxer has corresponded with Shell Oil President Lynn Elsenhaus to seek concessions from Shell. California State Senator Joe Dunn has announced special hearings on the Shell closure and the California Senate Rules Committee has extended Dunn's committee subpoena power. You, however, have been oddly silent on the populist issue of the day. You have said that you will do whatever it takes to keep businesses in California; why have you done nothing to stop Shell from shuttering this crucial refinery? It's time for you to break your silence, pick up the phone, and ask Shell to keep Bakersfield's refinery open until the end of the year, so that an appropriate buyer can be found. (For a record of the events surrounding the Bakersfield refinery see http://www.consumerwatchdog.org/utilities/)

The high price of gasoline is an issue of paramount concern for average Californians you vowed to represent. You may not have weighed in yet on the issue gasoline prices due to influence from oil company insiders who are close to you. Your chief of staff Patricia Clarey is a former lobbyist for Chevron. Chevron has contributed $121,200 to your campaign committees and $500,000 to the Republican party on your watch. ConocoPhillips has contributed $46,000 and Occidental Petroleum has given $50,000.

Governor, if these special interests have no sway over you, it's time you take a stand for motorists that forces California's refiners to compete by creating more gasoline, not cheat by artificially reducing the state's supply of gasoline. Make a statement about keeping the Shell refinery open. If ever there was a time to use your clout for Californians, this is the moment, before $3 per gallon gasoline becomes a reality.

Sincerely yours,

Jamie Court




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