Refineries Going Down: Is the Oil Industry Bilking Us?

I generally don't go for conspiracy theories. Usually the conspiracy story quickly devolves to the point that half of the world must be in on it, and somehow managing to avoid leaks to the other half. However, conspiracies do sometimes exist. In the case of energy pricing, we need only go back to the manipulations by those clever boys at Enron that earned the company hundreds of millions of dollars and sent electricity prices soaring in California back in 2001.

For this reason, a NYT piece reporting on an extrodinarily high number of oil refinery shutdowns is too dismissive of the possibility of any coordinated activity. The article notes conspiracy theories circulating on the Internet, but then tells us that "experts point out that the companies have little incentive right now to hold back on fuel supplies." It follows through with a reassuring comment from an analyst at Goldman Sachs.

Of course any individual refinery would certainly benefit from pumping out more gas at the current price. But if there was a wink and nod agreement by a few of the biggest companies not to rush repairs, they all would benefit more from the higher prices that result from these refineries being kept off line.

My guess is that there is no such agreement and the basic story of refineries being down for needed repairs is true. However, the conspiracy theory folks were right in California in 2001, and the dismissive experts were wrong.

--Dean Baker