Dishonor Among Thieves

The recent gas crisis should inspire reform

I don't get the adrenal cascade of rage much anymore, and I can't even remember the last time I saw the thin veneer of civil society collapse before my eyes.

I'm guessing that's why it was so invigorating to sit in line for an hour last week in 105-degree heat waiting to pay $2.29 a gallon for gas at the Chevron station at Alma School and Riggs in Chandler.

Soon after I finally filled my tank -- a once autonomic task made orgasmic by an hour of heated coveting -- I got a call from Terry Goddard, the maintainer of civil society in Arizona. He was returning calls as he waited to go on a television show in Tucson, where he would be following Joe Arpaio, who had driven his gas-hog Crown Vic all that way to show off some precious puppy he had rescued.

Goddard was in a lather, too, and I was excited to hear the state's attorney general so fired up that he was referencing Mad Max movies.

"It's really wild, isn't it?" he said in a high-pitched lilt of excited disgust. "I just keep thinking of those scenes of Mel Gibson driving the tanker truck across the desert and armed bands of thugs zooming around on motorcycles. Anarchy in motion. I've gotta say, we've got to make sure this doesn't happen again."

"I feel like I'm watching a cockfight or something," I told him. "We don't get much Lord of the Flies action in the Valley."

"Nor should we," our top prosecutor responded.

What I heard in Goddard's voice was political will. You heard the same thing in Governor Janet Napolitano's voice. You heard the same thing out of the mouths of every sad bastard sitting in line begging for the honor to buy overpriced gas.

Now the tough part: Hold that rage, folks. Don't forget your anger once the prices drop again. Then focus that rage on finding real solutions that aren't just another round of subsidies for the fossil-fuel industries.

The sad thing is, Arizonans have been getting gouged by energy-industry thieves for years. In both natural gas and gasoline, we rely on a single pipeline company with ancient, under-maintained lines and an ever-smaller cadre of giant shippers and refiners. And this small clique of massive companies has a well-documented, Enron-style pattern of just barely skirting federal antitrust laws with strategies meant to keep supplies unnaturally low to justify price spikes that net vulgar profit margins.

Earlier this year, the California-based Foundation for Taxpayer and Consumer Rights completed a comprehensive two-year investigation of the western U.S. gasoline market, which includes Arizona. The report's title should appeal to Arizonans right now:

"The Solutions Needed to Keep Pump Prices Under $2."

Reviewing industry data and depositions and internal memos of oil company executives produced in civil case discovery, researchers determined that the high pump prices in California and Arizona were the result of "intentional actions of the oil companies."

While oil industry executives have blamed price spikes on environmental regulation and the cleaner-burning fuels needed in areas such as Los Angeles and Phoenix, the researchers found the price increases were in fact attributable to inflated refiner profit margins.

"Recently released memos of oil company executives outline cooperative litigation and lobbying efforts intended to close down West Coast refining capacity, short the West Coast market of adequate inventories and insert language into environmental regulations that, unbeknownst to the policy makers, would ensure smaller competitors went out of business. The goal of the effort seems clearly identified in the memos as a means to legislate higher consumer pump prices for the benefit of the refiners."

Also: "The constant increasing or decreasing of production by the oil companies at their local refineries had the greatest impact on prices at the pump. The level of gasoline inventories in storage tanks is kept as low as possible to maximize price, but just high enough to avoid the return of gas lines if an unexpected disruption of flow into storage draws the inventory down. Just in time inventories' is the industry terminology for today's practice of maintaining low levels of inventory."

In Arizona, the game is more precarious for oil executives because we have no quick alternative source if the one major pipeline breaks. The short supplies dwindle quickly and cause the gas lines, and price spikes, you suffered last week.

The exact same games are played in the natural gas industry. And Arizona is just as vulnerable to thieves in the natural gas market as they are in the gasoline market.

Two years ago, I wrote about one such anti-competition industry plan, a plan hatched by natural gas executives in a secret meeting at the Embassy Suites Hotel near Sky Harbor Airport in 1996.

The meeting brought together senior management of SoCalGas, San Diego Gas & Electric and the gas provider for the Valley, El Paso Natural Gas.

At the meeting, SoCalGas executives agreed to stop competing with El Paso Natural Gas on a power plant project in northern Mexico if El Paso Natural Gas would cancel its plans to build pipelines into Southern California that would have broken SoCalGas' monopoly in Southern California.

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