- The Washington Times - Thursday, June 22, 2000

Vice President Al Gore appeared yesterday to yield to Republican criticism that the administration is not doing enough to blunt skyrocketing gas prices in the Midwest.

In a statement mostly blaming "big oil" companies for profiteering from tight gasoline markets, Mr. Gore asked the Environmental Protection Agency to "work with" Midwestern governors who have requested a temporary exemption from clean fuel regulations to ease pump prices soaring over $2 a gallon in Chicago, Milwaukee and other areas.

The governors of Illinois, Wisconsin and Michigan contend that the EPA rules, which were imposed June 1, are behind the record prices. They want a temporary waiver from the rules or an exemption that gives the states credit for burning cleaner, ethanol-blended fuel.

But while Mr. Gore appeared to soften some in the face of escalating criticism from Republicans, EPA Administrator Carol M. Browner yesterday continued to deny any responsibility for the problem and stepped up her attacks on oil companies, which she says are to blame.

Pointing to a 25-cent drop in wholesale prices for gasoline in Chicago and Milwaukee since last Thursday, she said oil companies are price gouging.

Red Cavaney, chief executive of the American Petroleum Institute, who attended a meeting with Mrs. Browner and members of Congress on Capitol Hill yesterday, said he expects prices at the pump to start coming down now that wholesale prices have declined.

But he said Mrs. Browner's accusations "are without factual basis" and noted that oil companies often get blamed and are targeted for investigation when gasoline prices go up.

"Our record of being exonerated by those investigations is spotless," he said, predicting that a formal probe begun by the Federal Trade Commission this week will find no wrongdoing.

Mr. Gore, he added, "did not have a command of the facts" when he laid the blame on oil companies.

Mrs. Browner said she is not ruling out giving the Midwestern states a waiver. The agency earlier this month waived the rules for St. Louis at Missouri's request because of difficulty complying with the new regulations.

"We would have to be very, very responsible how we handle a waiver," she said. "I think it's important to understand that a waiver could bring with it its own disruption in price."

Republican leaders also softened their demands somewhat yesterday. House Speaker J. Dennis Hastert said he is looking mostly for "flexibility" from the EPA administrator to help gas stations in the hard-hit areas get through the current supply shortage and lower their prices.

"We need a waiver or flexibility on what gas stock you use," the Illinois Republican said.

But he said the EPA "must accept partial responsibility for these higher gas prices in Illinois and Wisconsin."

Some Republicans accused Mrs. Browner of being "tone deaf" and asked Mr. Gore again to intervene with his onetime Senate staffer.

Still others said it is Mr. Gore who refuses to take responsibility for the Midwest problem and do something about it.

"When the going gets tough, Al Gore points fingers," said House Majority Leader Dick Armey, Texas Republican.

While the debate raged on Capitol Hill, the Organization of Petroleum Exporting Countries (OPEC) yesterday approved a small increase in world oil production of 708,000 barrels a day to 25.4 million at a meeting in Vienna, Austria. That amount is not enough to ease the tight U.S. markets, analysts said.

Briskly growing demand in the United States, which consumes one-quarter of the world's oil production, or 19 million barrels a day, is a principle reason for the higher prices that oil and gas companies are charging, analysts said.

Outside the United States, demand is not growing as rapidly, giving the international oil cartel little reason to increase production dramatically. OPEC members like Venezuela cut back production dramatically last year after oil prices collapsed to record lows and are not eager to ramp up production now because they got burned so badly then, analysts said.

Also, the high-sulphur crude oil produced in the Middle East does not meet the EPA's clean-air standards and will do little to ease prices for hard-pressed Midwestern drivers, said Jay Saunders, oil analyst with Deutsche Bank Alex. Brown.

Commenting on the political debate, Mr. Saunders said it is not surprising that states are trying to opt out of the new clean fuel program and the oil companies are being blamed.

"The oil companies invented the reformulated gasoline, but people don't want to pay for it," he said, joking that Americans think they have "a constitutional right" to cheap fuel.

Oil company profits are handsome these days, but the higher prices they are charging are not the result of illegal collusion or price gouging, he said.

"They're selling it for whatever they can get for it, like any capitalist would do. If there's a shortage and demand is high, up is where the prices are going to go."

Mr. Cavaney attributed the Midwest problem to a complex set of events that came together at once, including a 27 percent jump in crude oil prices since late May, the EPA regulations, pipeline disruptions, a patent dispute and high state and local taxes.

He noted that the Congressional Research Service had much the same explanation of events in a report on the Midwest situation released Tuesday.

The report estimated that half of the Midwest's gas spike was caused by supply and pipeline problems, and the rest is from the EPA regulations.

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