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WASHINGTON -- U.S. oil-company executives defended their gasoline-pricing practices before a Senate investigative panel.
Speaking to the Senate permanent subcommittee on investigation, the officials blamed the recent increase in pump prices on crude-oil prices that aren't in their control, a patchwork of regional-fuel regulations that have reduced supply flexibility and environmental regulations that impede refinery expansion, according to The Wall Street Journal.
The subcommittee's Democratic majority staff issued a report this week blaming oil-industry consolidation and corporate strategies for exacerbating gasoline- price spikes in the Midwest and West Coast over the past three years.
The U.S. hasn't seen a new refinery built in 26 years, and even with refinery utilization at high levels, most of the oil-company executives told the Senate panel the profit motive for a new refinery isn't there.
"Money devoted to refining, delivery and marketing has earned some of the lowest returns in business -- an average of about 5.5% a year over the last 20 years," said Gary Heminger, president of Findlay, Ohio-based Marathon Ashland Petroleum LLC, a joint venture between Marathon Oil Corp. and Ashland Inc. The joint venture operates more than 2,500 convenience stores.
Heminger was the only one of five industry executives testifying on hand indicating his company would consider building a new refinery.
"Would we invest in a new refinery? We certainly would give strong consideration to that," he said in response to query from Sen. George Voinovich (R-Ohio ).
In the first three months of 2002, the U.S. imported about 2.2 million barrels a day of refined petroleum products, representing slightly more than 11 percent of the domestic market. But the industry officials said expansion of existing units and increased imports make more sense than new facilities.
"My company doesn't need any more refineries," said James Carter, director of ExxonMobil Corp.'s U.S. fuels marketing unit. "We have done a really excellent job of expanding the ones we have: they're large refineries, they're highly efficient."
However, Mr. Carter said such expansion has been threatened by recent federal enforcement of a policy known as new source review, which can require strict pollution-mitigation measures for added capacity at older sites, the report said.
BP Plc, which has purchased both Amoco and Arco over the past four years, has recently sold some U.S. refineries. "We believe that the economics of the business support an increase in purchases rather than investment in a refinery," said Ross Pillari, president of BP's U.S. marketing group.
Several of the executives said most of their recent investment in U.S. refineries has been to meet stricter environmental specifications, including lower sulfur content, blending of ethanol into motor fuels and production of various relatively clean-burning "boutique fuels."