California Crude Oil:
An Analysis of Posted Prices and Fair Market Value
GGD-88-114, Sep 8, 1988
In response to a congressional request, GAO reviewed whether posted crude oil prices in California reflected the oil's fair market value for federal windfall profit tax and royalty purposes.
GAO found that: (1) Internal Revenue Service and Minerals Management Service studies showed that oil companies sold substantial quantities of oil at the prices considered as fair market value; (2) California and the city of Long Beach filed a suit against the oil companies concerning allegations that major oil companies conspired to keep the posted prices artificially low in California; (3) oil sell-off programs generally generated selling prices with bonuses above the posted prices; (4) because independent refiners had limited supply sources, they purchased 100 percent of the oil the city and state auctioned and as much as 82 percent or more of the oil that the Department of Energy auctioned; (5) although refined petroleum prices in California were in line with prices in the rest of the United States, crude oil prices appeared lower than elsewhere; and (6) there were no enforceable complaints regarding violations of common carrier obligations with intrastate pipelines crossing federal lands.