Transportation Fuels Market

February 15, 2013

New Report: Market Conditions Caused 2012 Gas Price Spikes

SACRAMENTO – The gasoline price spikes of 2012 were fully attributable to market conditions, according to a newly released study prepared by the well-respected transportation energy consulting firm Stillwater Associates. A full version of the report can be accessed below.

The study was commissioned by the Western States Petroleum Association (WSPA) in response to a report issued last year by Robert McCullough of McCullough Research, an Oregon-based electricity consultant, which speculated that the market volatility may have resulted from market manipulation.  McCullough’s allegations led six US senators to call for a US Department of Justice investigation of refiners.

The Stillwater analysis concluded that the McCullough paper indicated a lack of familiarity with the oil industry and gasoline markets on the West Coast, and contained numerous errors and inaccuracies.  In addition to exposing the material flaws in the McCullough report, Stillwater conducted its own analysis of the price fluctuations.

Stillwater found that the market volatility in question was directly associated with unplanned refinery outages and supply disruptions that heavily impacted the spot market for fuels.  Far from withholding supplies, as McCullough alleged, Stillwater cited data developed by the California Energy Commission which showed that the refining industry actually increased refinery utilization in response to the situation. This combined with Governor Brown’s action to accelerate the schedule for the transition from the state-mandated summer to winter gasoline season provided the relief necessary to drive prices back down “as one would expect in a competitive market.”

As capsulized in the Stillwater report’s executive summary:  “The gasoline price spikes of 2012 are entirely explainable using publically available data, are consistent with competitive market behavior, and are inconsistent with the McCullough paper’s contention that refiners may have agreed to allocate production targets in order to maintain higher prices.”

    The result of Stillwater’s research is consistent with those of many previous investigations of similar market fluctuations by government agencies and private sector economists.

    “Dozens of investigations over the years have consistently found that fluctuations in gasoline prices – both upward and downward – are attributable to market conditions, not illegal activity on the part of the petroleum industry,”’ said WSPA president Catherine Reheis-Boyd.

    “WSPA’s members have always cooperated fully in these inquiries and will do so in this case. We are confident the conclusion will be similar to that of Stillwater Associates,” Reheis-Boyd concluded.

For more information, contact Tupper Hull (WSPA) at 916-498-9203 or David Hackett (Stillwater) at 949-653-5899
  

About Stillwater Associates LLC:  Stillwater Associates is a transportation energy consulting company whose practice areas include energy policy.  Stillwater has been retained by the US Energy Information Administration, the California Energy Commission, Hawaii’s Department of Business, Economic Development and Tourism to write reports addressing the gasoline market on the West Coast, and has been retained by the Federal Trade Commission and several state’s Attorneys General to provide expert witness services in the gasoline market space.

Stillwater Critique of McCullough Research Report February 2013.pdf

Stillwater Report Fact Sheet.