US FTC to investigate Midwest gasoline prices

President Clinton said Friday that the US Federal Trade Commission is looking to see whether oil company collusion is behind the recent gasoline price rise in the US Midwest. Oil industry experts have said the regional price increase is a result of short gasoline supplies, a pipeline rupture, and the Phase II federal reformulated gasoline requirements that took effect June 1. But other groups disagree about the causes.


President Clinton said Friday that the US Federal Trade Commission is looking to see whether oil company collusion is behind the recent gasoline price rise in the US Midwest.

Expressing frustration over the price increase on NBC's Today show this morning, Clinton noted that drivers in Chicago and Milwaukee are paying nearly 40�/gal more for gasoline than the rest of the nation. �What we don�t know is whether there was any price gouging," Clinton said.

On June 12, senior Clinton administration officials met with several major refiners and demanded an explanation for the high Midwest gasoline prices, reported Reuters.

The Department of Energy and the Environmental Protection Agency have been looking into the problem during the past week (OGJ Online, June 9, 2000). But EPA Administrator Carol Browner said Thursday that she and Energy Sec. Bill Richardson requested an expedited FTC review of gasoline prices in the region.

The FTC may issue subpoenas to oil companies to obtain information. The investigation will likely take several weeks.

Who's to blame
Oil industry experts have said the regional price increase is a result of short gasoline supplies, a pipeline rupture, and tighter environmental standards for gasoline sold in certain regions. Phase II federal reformulated gasoline requirements took effect June 1.

President Clinton acknowledged these causes: �We know that prices were affected by the shutdown of a refinery, which is coming back up; a leak in a pipeline, which is the cheapest way to transport gas; and an unusual increase in demand in the Chicago-Milwaukee area. And all that affected it,� he said.

In a Today show interview earlier this week, however, American Petroleum Institute official Edward Murphy had said that problems associated with the gasoline oxygenate ethanol had contributed to the price spike. Use of ethanol, made from corn, to meet gasoline oxygen requirements is highest in Midwestern states.

The Renewable Fuels Association, an ethanol industry organization, said API "sought to mislead the public on the cause of unacceptably high gasoline prices in Chicago and Milwaukee."

RFA Pres. Eric Vaughn said, "The API should be ashamed for making such misleading statements to the public. The facts clearly demonstrate that the unacceptably high gasoline prices in Milwaukee and Chicago have nothing to do with the actual cost of producing Phase II RFG with ethanol. The price spike is being caused by a gasoline supply mismanagement problem in the Midwest."

US Sen. Peter G. Fitzgerald (R-Ill.) Thursday called on federal and state lawmakers to immediately roll back excessive gasoline taxes, which he said are a major cause of high fuel prices in Illinois and across the country. After meeting with Browner and members of the Illinois congressional delegation, Fitzgerald said Illinois's prices were the highest in the nation in part because state and local taxes there are higher than in many other states. In addition to the 18.4�/gal federal motor fuels tax, Illinois consumers pay a 19�/gal state gas tax and an additional 6.25% state sales tax on gasoline.

This is by no means the first time oil companies have been investigated in relation to rapid increases in gasoline prices. Such accusations of price gouging have become routine during gasoline price spikes.

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