- The Washington Times - Wednesday, September 21, 2005

The Federal Trade Commission is investigating whether oil companies have engaged in profiteering or restricted refinery capacity to fix gasoline prices, an agency official said yesterday.

The FTC has investigated reports of collusion and price fixing by oil companies since 2001 but has not found any evidence of it.

“The vast majority of the commission’s investigations and studies have revealed market factors as the primary drivers of both price increases and price spikes,” John H. Seesel, associate general counsel for energy at the FTC, testified yesterday at a Senate Commerce Committee hearing on energy prices.

“Although recent oil company profits may be high in absolute terms, industry profits have varied widely over time, as well as over industry segments and among firms,” he said.

The Senate last week approved a $1 million amendment to an appropriations bill to fund an FTC investigation into potential gas-price gouging at all levels of the supply chain.

Eight Democratic governors of Midwest and Western states joined the chorus of government officials and private citizens asking Congress to investigate gas prices, citing “the excessive profits being made by oil companies who are taking advantage of this national crisis.”

The letter cited a report from a University of Wisconsin professor who claimed to have found evidence of disproportionate increases in retail gas and crude oil prices.

Nationwide, gas prices are on the decline after climbing 46 cents to record highs of $3.07 per gallon earlier this month in the aftermath of Hurricane Katrina. The storm shut down more than 25 percent of U.S. crude oil production and 10 percent of domestic refinery capacity.

The sudden price spike “reflects the severity and expected persistence of Hurricane Katrina’s impact on refining operations in the Gulf,” Guy Caruso, administrator of the U.S. Energy Information Administration (EIA), told the Senate committee.

The Mid-Atlantic region, especially the Washington area, endured the steepest price increases. A gallon of regular reached a record $3.38 in the District Sept. 7, making it the most expensive in the country. The District’s price has declined since then, reaching $3.02 yesterday.

Ronald W. Kosh, AAA Mid-Atlantic vice president for public policy and governmental affairs, pointed out the discrepancy between gas prices in the Mid-Atlantic region and the rest of the country without going so far as to say price gouging was taking place.

“In these states, we’ve heard industry explanations that don’t measure up,” Mr. Kosh said, citing the case of a Shell station in Centreville, Va., that charged $6 per gallon after the hurricane.

A petroleum trade group blamed the large, local increases on station owners and the area’s distance from gas supplies.

“The decisions made at the retail level, at the stations, are made by individual businessmen and women,” Bob Slaughter, president of the National Petrochemical and Refiners Association, told the committee. “Only about 10 percent [of gas stations] are owned and operated by refinery companies.”

Mr. Slaughter also said the Washington area is at the end of the Colonial pipeline, meaning supplies here could get low when storms disrupt Gulf Coast refineries.

Industry executives said a federal price-gouging law would not be effective and could cause pricing and production problems similar to those that led to lines at gas stations in the 1970s.

Mr. Caruso of the EIA said state regulators can police pricing more effectively than federal agencies.

“The closer you get to the actual retail level, the wholesale level, the better you are,” he said.

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