www.bayarea.com Posted on Sat, Mar. 15, 2003 By Dennis Rockstroh Mercury News

I asked my pal Ray Olyaie, proprietor of the gas station at Fremont's busiest intersection and victor in a long battle again his nemesis, Exxon, for overcharging.

$$$$$.99,'' he said, or something like that. Because they can. When the war starts, I expect gasoline to cost at least $3.''

Already, prices at the pump have shot to all-time highs in 16 states.

Why?

Profit. Moolah. Money. Bread. Dough. Coin. Cash. $$$$.99.

I read to you from the Wall Street Journal, the newspaper of capitalism: ``Worries over a war in Iraq, a cold winter, the lingering effects of a recent labor strike in oil-producing Venezuela and complications in the increasingly lucrative oil-refining business are having potential effects on gasoline supply.

``One result: For some big oil companies, the profits could be huge.''

And why is California leading the drive upward?

Again the WSJ: ``One reason may be that California refining companies are currently reaping profit margins that are as much as 21 percent above the average for the past seven years.''

Laws favor companies

This strikes some people as wrong, possibly illegal. But they forget who writes the laws. And I don't have to tell you that some oilmen have been very successful in politics.

The governor wants an investigation, and two Bay Area legislators are calling for federal action.

Sen. Barbara Boxer, D-Calif., has asked the General Accounting Office, Congress' investigative arm, to inquire into gasoline prices here.

Rep. Mike Thompson, D-St. Helena, has introduced legislation to prohibit the practice of manipulating prices and preventing wholesalers from selling gasoline more cheaply to independent stations. Of the 8,500 gas stations in California, 6,500 are independently owned.

It is possible to beat Big Oil.

But don't hold your breath.

It takes courage and an iron will.

Like that of Olyaie, who waged a decadelong war with Exxon. And won.

In essence, he alleged that Exxon was overcharging all of its directly served dealers and prohibiting them from buying the same gas at a cheaper price from wholesalers.

Today, Olyaie's gasoline station is a Valero. But in the old days, it was an Exxon.

Over the years, while his battle raged with Exxon, Olyaie staged special gasoline sales to make his point.

The battle lines

Once, he gave gasoline away for one day to attract attention.

Another time he sold it for 99 cents a gallon, telling everyone that that was what the proper price should be if Exxon wasn't overcharging.

Exxon fought back.

The company even declared victory and scheduled Olyaie's surrender at high noon.

Wrote Exxon's E. Lee Curry to the combative Olyaie: ``Please arrange to be at the station at 12 o'clock noon on or before Nov. 01, 1994 to meet with your territory manager to surrender the premises and take the necessary steps to accomplish an orderly termination of our relationship.''

Olyaie told Exxon in so many words to go take a flying leap.

Olyaie is still at Fremont Boulevard and Mowry Avenue. Exxon is not.

In 1991, Olyaie joined a group of current and former Exxon independent dealers in suing Exxon for overcharging.

In 2001 a jury returned a verdict in favor of the dealers. The jury found that beginning on March 1, 1983, until Aug. 28, 1994, Exxon had overcharged its dealers approximately 1.3 cents per gallon. During that time, Exxon sold more than 40 billion gallons of motor fuel.

Exxon will have to repay the money if it loses its appeal. Olyaie's share would be about $230,000.

Now that's $$$$.99.

Contact Dennis Rockstroh at drockstroh@sjmercury.com.

www.miami.com Posted on Sat, Mar. 15, 2003 BY DALE K. DuPONT ddupont@herald.com

Gas in South Florida has crashed through the $2-a-gallon barrier.

Prices for higher-grade fuel are inching up over the magic mark, much to the dismay of drivers and dealers.

At a Shell station in downtown Fort Lauderdale, premium was going for $2.08 Friday. A Mobil station across the street was holding the line at $1.99. At a Shell on South Dixie Highway in South Miami, it was about $2.02.

If it's any comfort, the average price for regular in California is already $2.10 a gallon, said Geoff Sundstrom, spokesman for the automotive club AAA in Orlando.

''It's outrageous,'' said John Gauthier, who was filling up with $1.84 regular at a Fort Lauderdale Shell and did a double take upon seeing the premium price.

High-octane prices go with such high-performance cars as Corvettes and Porsches, but 80 percent of all cars run on regular, AAA says.

Station employees say they merely raise their prices when the oil companies charge more.

And when drivers complain?

Leslie Calli, a station manager on North Federal Highway, gives them Shell's customer-service number.

''We aim to offer a competitive wholesale price to our dealers,'' said Shawn Frederick, spokesman for Motiva Enterprises, a Shell affiliate. ``From there, it is up to the independent dealer to set his own street price.''

The American Petroleum Institute cites several reasons for the price hike: the recent strike in Venezuela, which reduced exports to the United States; tight worldwide crude-oil supplies; and nervousness about a possible U.S.-Iraqi war, which has traders bidding up prices.

Oil prices topped $35 a barrel Friday. That's down slightly from several weeks earlier, when they reached $37, their highest level since the last half of 2000.

Before that, oil prices had not hit such levels since late 1990, when the United States was last close to war with Iraq.

''I don't know of any other industry that raises their prices on anticipation,'' said Pat Moricca, president of the Gasoline Retailers Association of Florida, which represents independent dealers.

Through 2002, gas prices were closely tracking the rate of inflation. In March 1993, the national average for regular was $1.11. That translates to $1.39 in 2002 dollars (the latest adjustment figures available).

The actual average last March was $1.239. On Friday, according to AAA, it was $1.715 -- a 38 percent increase. The Consumer Price Index rose just 2.6 percent from last year's.

Yet the current price is not a first for the state, AAA's Sundstrom said. The auto club got reports of $2 in Gainesville and Tampa in early February. (AAA does not track prices by brand.)

Still, $2.08 may be a Florida high, Moricca said.

Wholesale distributors sometimes allow stations to buy only a certain amount when supplies are getting low, Sundstrom said.

In some cases, industry-owned stations can get more fuel than the independents.

''We are on tight inventories of gasoline across the country,'' said Sundstrom, adding that he had not heard of South Florida's being one of those areas.

Moricca sees independent stations as being squeezed because of contract restrictions that prohibit brand-name retailers from buying on the open market the way some big discounters can.

Profit margins should be 15 to 20 cents, he said.

''These dealers,'' he said, ``are working on a penny to five cents.''

And if you're tooling around downtown Fort Lauderdale in a Corvette, here's the price of filling your tank with $2.08-a-gallon gas: $41.60.

news.ft.com By Carola Hoyos in Paris Published: March 14 2003 22:12 | Last Updated: March 14 2003 23:55

The International Energy Agency, which co-ordinates oil stock releases, has given its first indication that its 26 members will tap into their strategic reserves in the event of war in Iraq.

Claude Mandil, head of the IEA, said consuming countries, as well as members of the Organisation of Petroleum Exporting Countries, would release stocks if military action disrupts oil production in the region.

"What we need to convey to the market is that the shortfall will be offset by both consuming countries and producing countries," he told the Financial Times.

Oil prices, up to almost $40 a barrel last month, have been falling sharply in recent days as it emerged that the campaign would start later than expected.

By Friday evening, April Brent crude was $1.27 lower at $30.38. The May contract fell $1.63 to $30.14. Any suggestion that the IEA members could release part of their 4bn barrels of stock could drive prices lower.

Mr Mandil insisted that the IEA would seek to counter the effects of any supply disruption. "If the market is tight, if the stocks are very low and if you have a sharp decrease of 2.5m barrels per day - which will be the case if Iraq and northern Kuwait were stopped - I would call it a supply disruption."

The fact that the agency appears ready for only the second time in history to release its oil stocks points to the imminence of war, analysts said.

In January 1991, the announcement that the IEA would release 2.5m b/d of oil from its strategic reserves coincided with the start of the air campaign. It prompted a record-breaking free fall in oil prices to $10.56 a barrel.

Friday's price fall was aided by comments from Spencer Abraham, US energy secretary. He said Washington reserved the right to make a unilateral release from its Strategic Petroleum Reserve without reference to the IEA. The US has about 600m barrels at its disposal.

The IEA said it did not believe the Opec cartel had enough spare capacity to offset the interruption caused by war. Conflict would affect Iraqi production of about 2m-2.5m b/ d and would probably cause a precautionary reduction of Kuwaiti output.

It warned of a potential shortfall of 1.68m b/d if the US went to war in Iraq in the second half of this month. That deficit would, however, drop to only 580,000 b/d if the Bush administration waited until April, when demand for heating oil is expected to drop as winter ends in the northern hemisphere. Saudi Arabia could also bring on stream its more inaccessible spare capacity.

How much oil the consuming countries will release will therefore be calculated on the basis of these assumptions and will depend on the timing of any war.

www.signonsandiego.com By Frank Green  UNION-TRIBUNE STAFF WRITER

March 14, 2003

San Diego County's short, pricey gasoline supply just got tighter.

Arco said it stopped selling unleaded regular on Wednesday at 59 of its 120 or so stations in the region after equipment at a local terminal failed to mix the additive ethanol in 420,000 gallons of gas.

Federal and state laws require a 5.75 percent level of the cleaner-burning additive in fuel sold in California.

The Los Angeles company said it delivered the ethanol-less gas to the stations before the malfunction was discovered. Arco then dispatched tanker trucks to retrieve the fuel, leaving some stations without any unleaded regular for as long as three days.

The amount of gas involved is enough to fill 28,000 15-gallon gas tanks.

"We contracted with virtually all the pump trucks in Southern California to pump the gas out of service station tanks," said BP Arco spokesman Daniel Cummings.

Cummings characterized the shortage as minor, adding that all of the affected Arco stations would again be selling unleaded regular by tonight.

By noon yesterday, 46 Arco stations were waiting to have their tanks refilled with reformulated fuel, Cummings said.

Consumer activists who follow the gasoline crisis in California said it appeared Arco was acting responsibly in trying not to ignite panic buying by motorists.

But Charles Langley, who manages the gasoline project for the Utility Consumers' Action Network, stressed that a supply glitch of as little as 3 percent has in the past caused prices to spike by as much as 30 cents a gallon.

UCAN said Tuesday that the average price for a gallon of unleaded regular was $2.14 a gallon, up 7 cents from last Friday.

Statewide, prices reached $2.127 a gallon this week, according to the American Automobile Association. Prices in San Francisco reached a record $2.251 yesterday. The nationwide average is $1.708.

Soaring prices largely reflect shrinking crude-oil supplies, analysts said.

Crude stocks have fallen near 28-year lows after a nationwide strike in Venezuela slashed shipments from the world's fifth-largest oil exporter.

The prospect that a U.S. war against Iraq could disrupt oil shipments from the Persian Gulf have also fueled a surge in the cost of oil, helping send crude prices to 12-year highs this week.

Meanwhile, Gov. Gray Davis said yesterday that oil companies may be manipulating gasoline supplies to cause record-high prices in California and gouge consumers

Recent "unexplained" surges in pump prices may be the result of a "deliberate withholding of supply" by oil companies, Davis said in letters to the state's energy and public utilities regulators.

"As we well know from past experience, many energy companies would rather use Enron-style tricks to fuel their bottom lines, than to fuel California homes and businesses," Davis said in the letter.

Energy companies "have no qualms about using world events, such as the Venezuelan oil strike and an unusually cold winter on the East Coast, to their advantage," Davis said. "In light of a possible war with Iraq, I hope that none of these companies are engaging in war profiteering or any other types of illegal activity."

The supply shortage at local Arco stations this week have only added to motorists' frustrations with spiraling prices.

Arco's Cummings said some of the company's local franchisees were accommodating customers by offering higher-grade fuel at unleaded regular prices.

"We apologize to customers who were inconvenienced" by the shortage, Cummings said.

Frank Green: (619) 293-1233; frank.green@uniontrib.com

sfgate.com Verne Kopytoff, Vanessa Hua, Chronicle Staff Writers Friday, March 14, 2003

Gov. Gray Davis ordered an investigation Thursday into soaring gasoline, diesel and natural gas prices, questioning whether the oil industry is engaged in illegal profiteering.

Davis asked the California Energy Commission and the state's Public Utilities Commission to examine what he called unexplained price spikes. He suggested that the sticker shock consumers are feeling at the pump and from their heating bills may actually be due to manipulation and a deliberate withholding of supplies.

"The prices are extraordinarily high and don't need to be," Davis said in announcing the investigations at a meeting in Sunnyvale of the Silicon Valley Manufacturing Group, a technology trade association.

The Energy Commission and the PUC are expected to report back to the governor within 15 days. If the commissions discover anything suspicious, the information could be referred to state Attorney General Bill Lockyer for further investigation and possible prosecution.

The governor's call for investigations into fuel costs coincides with gasoline prices hitting all-time highs across the state. A survey this month by the AAA of Northern California shows that the average price for a gallon of regular unleaded Thursday in San Francisco was $2.25, up 71 cents from a year ago.

Natural gas prices are also spiking. An average Pacific Gas and Electric Co.

customer will pay $69.27 in monthly gas bills for March, about 80 percent more than a year ago.

GOUGING DENIALS

John Felmy, an economist for the American Petroleum Institute, the oil industry trade group, rejected the notion that drivers are being gouged.

Increases in gasoline prices, he insisted, are a consequence of a "perfect storm" of factors ranging from tensions in Iraq to a strike by workers in Venezuela to extra costs associated with California's switch of the smog- reducing fuel additive MTBE to ethanol.

"This is the market at work," Felmy said.

His comments echo what natural gas suppliers are saying. They blame the high prices on a cold winter in the East Coast, in addition to the other factors affecting gasoline.

The rising fuel prices in California elicit obvious comparisons to the state's past electricity crisis in 2000 and 2001, after which suppliers and middlemen were found to have manipulated the market. Davis, who faced stinging criticism for his initial handling of that situation, cast himself as an aggressive consumer advocate this time around.

"As we well know from past experience, many energy companies would rather use Enron-style tricks to fuel their bottom lines, than to fuel California homes and businesses," Davis wrote. "These companies have no qualms about using world events, such as the Venezuelan oil strike and an unusually cold winter on the East Coast, to their advantage."

Felmy, the petroleum industry economist, gave a emphatic response: "It's simply disappointing for the governor to say we're using Enron-style tricks. To lump us in with those well-known problems is unacceptable."

Over the years, the oil industry has been investigated by at least two dozen local and state governments related to price manipulation. Felmy said that it has yet to be found guilty.

On Wednesday, the Energy Information Administration, an arm of the federal Department of Energy, said in a weekly report that it believes the current spike is driven by market forces, not gouging.

Sen. Barbara Boxer, D-Calif., has asked the General Accounting Office to look into the price increases. Other senators have asked the Federal Trade Commission for a similar inquiry.

California is among those governments that have pursued the oil industry. In 1999, Lockyer began an investigation of gasoline price spikes after a particularly strong episode here.

He ultimately reported that California was highly susceptible to a volatile fuel market due to a limited number of companies owning the vast majority of refinery capacity.

He also said that the state's requirement for a special clean-burning fuel blend made gas imports difficult to get in times of need.

No criminal or civil charges were brought against the oil industry by Lockyer. The investigation is still open, according to Tom Dresslar, a Lockyer spokesman.

"We'll be happy to take whatever evidence or information the PUC or Energy Commission come up with as part of their investigation," he said. "We haven't found anything yet, but that doesn't mean it doesn't exist."

Davis vetoed a part of a state Senate bill that would have given the attorney general $1 million to investigate the oil industry in 1999.

Gabriel Sanchez, a Davis spokesman, said the governor merely thought the attorney general's office could do the investigation with existing funds.

"He does want to get to the bottom of things," Sanchez insisted. "It shows that even back in '99, he was just trying to be a very good fiscal manager."

Davis has accepted $1.27 million in campaign contributions from the oil and gas industry since 1997, according to the National Institute on Money and State Politics, a political watchdog group. Lockyer has received $279,562 in similar contributions during that time, according to the the institute.

HARD TO PROVE

At the event in Sunnyvale Thursday, Davis acknowledged that proving an antitrust case against the oil industry will be difficult. But he added that an industry's high prices tend to moderate or go down when that industry is being investigated.

"Do I have proof, any evidence?" Davis said of the possibility of fuel prices being manipulated. "No. But as governor, I have an obligation to do something about it. Prices do not just go down, and that is my goal, whatever the reason."

Robert Pringle, head of antitrust matters for the Thelen Reid & Priest law firm in San Francisco, said of Davis' call to arms Thursday: "It's highly political. If the government doesn't do anything, it looks like they're not doing their job."

One wrinkle mentioned by Sandy Litvak, an attorney for the Quinn Emanuel law firm in Los Angeles, is that drivers will have to wait a long time before even a successful case against the oil industry pays off.

"It's too difficult to prove," Litvak said. "And if it was really the case, it would be decided four years from now -- a lot of good that will do."

Still, consumer groups praised the governor.

''Consumers feel bent over the oil barrel," said Charles Langley, who oversees the gasoline price issue for the Utility Consumers' Action Network in San Diego. "People need to know, are we paying a fair price or not?"

WHAT THEY DO

California Energy Commission: Oversees energy planning and policy. Duties include forecasting the state's energy needs, advocating energy efficiency and keeping historical energy data such as prices, production and consumption.

California Public Utilities Commission: Regulates natural gas, electricity, telecommunications and private water suppliers. Sets rates and rules for utilities; monitors complaints.

E-mail the writers at Verne Kopytoff at vkopytoff@sfchronicle.com and Vanessa Hua at vahua@sfchronicle.com.