By OGJ editors
WASHINGTON, DC, May 15 --The Federal Trade Commission said it plans to be more sophisticated in the way it monitors gasoline price spikes.
FTC Chairman Timothy Muris last week said that the commission's monitoring efforts will include the use of a statistical model to track gasoline price spikes on a "real-time" basis that regulators can use to monitor market factors more quickly.
The model will use data from the Oil Price Information Service (OPIS) on daily average retail prices for about 360 cities, as well as data on daily average wholesale (rack) prices for 20 key urban areas across the country, representing about 40% of all US gasoline stations, FTC said.
Muris's comments were part of a 2-day public conference the agency held on gasoline pricing in which various experts from academia, industry, and Wall Street offered regulators and the public detailed analyses of the economic factors that can contribute to sticker shock at the pump.
FTC also plans two new gasoline pricing-related projects due for release later this year. The first will use information gathered from 1985 to 2000 to update the FTC's previous oil merger reports of 1982 and 1989, and the second will be an agency review of the "complex interaction" of factors that affect the prices of refined petroleum products.
American Petroleum Institute Chief Economist John Felmy told FTC officials that when they examine the various factors that contribute to gasoline prices, they should be aware that government requirements to make and distribute 19 different gasolines are a continuing influence on gasoline prices.
He said "boutique" fuels reduce the flexibility that refiners and distributors need to keep gasoline flowing when unforeseen circumstances affect supplies from one region or one company.
API and other panelists also agreed that a key factor that influences the cost of refined fuels is how much a barrel of crude is trading for on world oil markets.
Political damage control
Higher-than-normal spring gasoline prices this year led regulators and lawmakers to contemplate the possibility they had a serious election-year issue on their hands.
And while prices have stabilized over the past month, both the FTC and Congress are quick to recall highly publicized gasoline price spikes last year, particularly in key Midwestern swing states that may help decide control of a closely-divided Congress this November.
Late last month, Sen. Carl Levin (D-Mich.), chairman of the Senate Permanent Subcommittee on Investigations, released a report alleging that increasing consolidation of the refining industry has led suppliers to increase prices by reducing supply.
He severely criticized the FTC-condoned practice of "zone pricing" that allows marketers to charge different prices for gasoline to different station operators, some of which are in nearby geographic areas. Levin said oil companies use this practice in order to "confine price competition to the smallest area possible and to maximize their prices and revenues at each retail outlet."
The Apr. 29 Senate report said that over recent years oil companies have sought to circumvent antitrust laws by shrinking the size of the zone in some cases to just one retail outlet.
The report was unveiled the day before a series of hearings were to be held to update the public on his subcommittee's 10-month investigation into gasoline prices.
Levin's staff analyzed data obtained from the private company OPIS and the US Department of Energy's statistical arm, the Energy Information Administration. The subcommittee also issued subpoenas to a number of major oil companies and one pipeline company for "relevant" refining and marketing documents from 1998 through 2001.
Levin directed his staff to launch an investigation in June 2001 following dramatic gasoline price spikes in the Midwest. This spring, prices are again rising, and there is a concern that part of the reason is the growing consolidation of the oil business, congressional staff said. Less competition means companies can more easily manipulate prices in a given region, they maintain.
No hearings on the gasoline price issue have been scheduled yet in the Republican-led House, but industry officials concede that if prices continue to rise, there could be hearings there as well.
Refuting conspiracy claim
Industry, however, refuted the view that a handful of companies conspire to drive up prices, as has been alleged in the past by some consumer groups and environmentalists.
"America's gasoline refiners have cooperated with numerous federal and state investigations over the past 3 decades, all of which have found no evidence of collusion or other anticompetitive activity by the petroleum industry. These investigations have shed light on the many factors that determine the price of gasoline at the pump," API officials said in a statement following Levin's report.
"Fuel prices are driven by market forces. Because crude oil is the largest nontax cost component of a gallon of gasoline, the price of gasoline is determined largely by the demand and supply of crude oil worldwide.
"Gasoline prices are also affected by refinery and pipeline interruptions and by constraints that numerous specialized fuels across the country place on refineries and pipelines. Each time there have been supply problems, companies responded by rushing in additional supplies to affected areas, and gasoline prices consequently have gone down.
"The problems that cause market volatility are likely to continue until refiners gain greater regulatory flexibility to decide how best to fully meet all clean-air goals."
Industry witnesses that testified before the Levin panel including executives from the following oil companies: BP America Inc., ExxonMobil Corp., Marathon Ashland Petroleum LLC, ChevronTexaco Corp. and Shell Oil Co.