For gasoline consumers, the ups and downs of prices can seem mystifying and aggravating, which is why there is no end of the dark conspiracy theories about gasoline prices and oil companies.
To those of us who follow fuel markets on a daily basis, and who understand the intricacies of supply contracts, future markets and options, gasoline prices are usually an elegant reflection of the constant push and pull of supply and demand.
It is disappointing, then, when individuals with little understanding of the subject offer vague theories suggesting sinister motives and illegal conduct when the evidence clearly points to neither. Robert McCullough, a self-described expert in electricity markets for Portland, has again offered up his theories and accusations in an op-ed. (“Transparency in fuel pricing long overdue,” Capitol Weekly, Aug. 22).
Mr. McCullough may be an expert in electricity but has made it clear he does not understand fuel markets. Last fall, Mr. McCullough began promoting his theories that oil company supply manipulation was creating unnecessary volatility and price spikes in California. He produced a report he claimed showed there was no correlation between refinery and pipeline upsets, fuel supply shortages and sharp increases in the wholesale and retail cost of gasoline.
At the request of the Western States Petroleum Association (WSPA), Stillwater analyzed Mr. McCullough’s research on the subject and quickly discovered he had based many of his conclusions on inaccurate descriptions of the market, incorrect interpretations of information and used the wrong measures for his analysis of gasoline inventories and prices.
I wasn’t alone in my view that his research missed the mark by a mile. The California Energy Commission said there were in fact strong correlations between changes in prices and a series of outages at refineries in California and Washington, as well as a pipeline incident that further interrupted supply.
The ultimate proof came when supplies were restored and prices came down sharply.
It is true, as Mr. McCullough states, that Californians pay more for gasoline than most drivers elsewhere in the country. But the reasons for this differential have been studied and reported on by the U.S. Energy Information Administration, the California Energy Commission, the Federal Trade Commission, the California Attorney General and others. The highest fuel taxes in the nation, unique product specifications, the toughest air quality standards and relative isolation from other refining centers around the country all lead to higher prices and greater volatility. Those facts are well known and well understood by real experts in the economics of fuel markets.
Oil company market conduct has been investigated dozens of times over the past several decades without anyone ever finding fault or evidence of wrong doing. In each and every case when government agencies have looked closely and carefully, they have concluded supply and demand are the determining factors behind gasoline prices.
Mr. McCullough also makes a baffling statement that, in his opinion, “another spike seems to be knocking on our door.” He offers no information about the basis for this prediction.
Indeed, gasoline markets as reflected in the prices have been fairly stable in recent months. And rather than showing signs of spike, prices have been trending downward since July. Of course no one can predict what prices will do in the future, least of all Mr. McCullough, because no one can predict the myriad forces that influence the supply and demand for gasoline.
Mr. McCullough states “Organizations like WSPA continue to push back against compelling research that points to potential gas price manipulation.” The truth is, there is neither research nor evidence that points to price manipulation of gasoline markets in California. There is only Mr. McCullough who seems compelled to continue a crusade built on misunderstanding, misinformation and misdirection.