The newspaper reports that in just one month, November 1996, Shell's profit on a per-gallon basis in Hawaii was 166 times greater than the total for the entire region, according to the records.

Even more revealing, the documents filed by Shell in Hawaii’s antitrust lawsuit against the oil companies show that the majority of the price disparities between regions of California are not the result of higher costs of doing business as previously asserted by the oil companies in public debates in San Diego and San Francisco.

Shell, and representatives of the other oil companies, have argued that higher costs of doing business in the San Francisco, San Diego and Los Angeles markets were the reason for higher gas prices. However, the Shell documents uncovered in Hawaii show fixed costs in San Diego, Los Angeles, and San Francisco (7.2, 7.1 and 7.4 cents per gallon respectively) are basically the same. The majority of the differences at the pump are found in company margins (12.7 cpg, 8.1 cpg and 19.4 cpg, respectively), as much as 300% higher than LA.

"That level of profit is absolutely astronomical," said Tim Hamilton, AuTO-CA’s petroleum consultant who has studied market conditions throughout the West and reviewed the documents uncovered by the Star-Bulletin. "It's confirmation once again that the high pump prices in Hawaii were almost entirely due to pure profits (for the companies), not the cost of doing business," Hamilton told the reporter.

The Honolulu Star-Bulletin stated that Chevron has been the only company whose profit levels specifically have been cited in the public court filings -- and only indirectly through allegations by the state. In its lawsuit, filed in federal court in October 1998 but amended twice since, the state alleged that Chevron's net profits on local gas sales in 1998 were five times greater than its gas profits on the West Coast. The state last year made the allegation - not disputed by Chevron at the time - after reviewing internal Chevron documents obtained in the evidence-gathering process. Those records have not been made public.

Like most internal company documents in the case, the Chevron records have been kept secret under a strict protective order imposed by the court, a common practice in complex antitrust litigation.

But the Shell documents were placed in the court file that is accessible to the public -- despite being marked highly confidential and subject to the protective order. The documents were part of a Shell filing dated June 29 in which the company was opposing a state request seeking more records.

What is the significance of the top-secret documents mistakenly released to the reporter by a clerk in the federal court? The often-used statement by the oil company public relations persons whom claim the higher prices in San Francisco and San Diego compared to Los Angeles are caused by higher costs of doing business, i.e., real estate, labor, etc. are contradicted by the internal Shell documents. The same holds for the marketing department representative who tells dealers the company is not making any money.

Should you have questions regarding this correspondence or other materials you receive related to the oil industry, please don't hesitate to contact Will L. Woods, CAE, Executive Director, at the AuTO-CA office, 714.734.1801.