Grizlaw wrote:If nobody has a link, can anyone at least describe what Schweitzer actually said? I'm curious, and all I got from HB's post was that he said some things that run counter to the basic rules of supply & demand; can anyone be a little more specific?
I think this is the article he's referring to....
Schweitzer: Refineries are gouging consumers; Industry leader calls foul
THE ASSOCIATED PRESS & JAMES E. LARCOMBE Tribune Business Editor
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HELENA — Gov. Brian Schweitzer is criticizing Montana oil refineries, saying some have raised prices for gasoline as much as 50 cents a gallon since Hurricane Katrina, despite no evidence that their own production costs have risen.
"Even though their cost of production hasn't gone up one penny, they're raising the price 30, 40, even 50 cents," he said. "I think that's an outrage."
The top manager of the Montana Refining Co. in Great Falls disputed Schweitzer's statements, saying his refinery's price increases barely cover its costs.
Hurricane Katrina, which struck the Gulf Coast early Monday, caused major damage to oil-production facilities in the Gulf of Mexico and the South. Since then, gasoline prices across the country have been climbing steadily — in some areas by the hour.
Schweitzer, however, said refineries in Montana get most of their crude oil from Alberta, Wyoming and Montana, and the cost of that oil has not risen since Katrina struck.
Montana refineries shouldn't be affected by developments in the Gulf, and therefore have no reason to raise prices so dramatically, he said.
"I'm calling on them to be good neighbors and roll back prices to the same prices that (they) had last week," he said.
Montana Refining's Leland Griffin disputed Schweitzer's allegations. calling them "rash statements."
"He says our raw materials costs haven't gone up and that's not true," the Great Falls refinery manager said. "Our raw materials cost during the past week have gone up significantly, $5 or $6 per barrel."
Refinery officials have said Canadian producers base their prices on international markets which reflect the problems in the Gulf Coast.
Montana Refining raises its wholesale price by five cents per gallon for every $1 dollar rise in its crude oil costs. The refinery has increased its wholesale price by 30 cents in the past week, in line with cost increases of 30 to 35 cents, Griffin said.
The Great Falls refinery, the state's smallest, doesn't have a large stockpile of crude oil or gasoline. Many refineries try to build supplies of gasoline in early summer.
"There isn't a whole bunch sitting out there that we are rising prices on," Griffin said. "Generally, by Labor Day, we are reaching the bottom."
The refinery is selling its entire inventory of gasoline each day and is limiting the amount it sells to each of customers.
"We are out of gasoline absolutely every day," Griffin said. "The only way we have to price things is based on how much its costing us to refine it that day."
The Great Falls refinery does average the price of crude oil it uses when making gasoline and other products because it's impossible to attach an exact cost to oil in big storage tanks that receive oil in different shipments.
The low seasonal inventory and hurricane disruption, coupled with increased buying by consumers fearing more price hikes, could create supply problems.
"The demand is higher than the amount of production," Griffin said. Whether we have people waiting in lines, it all depends on how the public behaves. If we have people hoarding, we may well have."
Representatives of two of the largest refineries, Cenex Harvest States in Laurel and Conoco-Phillips in Billings, did not immediately respond to telephone messages left by The Associated Press on Friday.
The Billings and Laurel refineries produce the majority of gasoline consumed in Montana.
In a news release, however, the Montana Petroleum Marketers & Convenience Store Association, said retailers and wholesalers are seeing "accelerated price increases" and have to plan for "replacement" costs for future gasoline deliveries.
"The price increases occurring at the gasoline pump are in response to daily — or more recently more often — price increases at the wholesale level," the group said in a statement.
"The association does not condone or support price gouging of any nature, and it is not aware of any location that has operated in this manner," the group added.
Schweitzer said he spoke to local managers at some of the refineries, and they gave no indication that they would be lowering prices.
The governor said he has asked Attorney General Mike McGrath to investigate the rise in gas prices.
AAA, the nonprofit auto group, urged motorists to have patience in pricey times.
"Since supply can only be replenished when all refineries and pipelines are running at full speed and it is uncertain when that will occur, demand must ease to shift the imbalance and calm surging fuel prices," Montana AAA said in a statement.
Griffin had a similar message.
"This thing will pass," he said. It might take a few weeks, but it will pass."
