The controversy over higher U.S. gasoline prices has cooled but not evaporated.
A Department of Energy report predicts gasoline prices will continue to drift down the rest of the summer. Energy Sec. Hazel O'Leary said, "Barring unforeseen events, prices should continue to decline by as much as 10/gal and even more in California."
President Clinton last April ordered DOE to determine why gasoline prices had increased. DOE's report confirmed what oil industry analysts and officials have been saying all spring.
Sparking the surge
O'Leary said DOE found the surge was triggered by a combination of events: low product inventories, an unusually long winter, uncertainty over Iraq's reentry into the world oil market, and high product demand.
DOE said the average retail price of gasoline jumped about 20/gal between mid-February and mid-May but has since fallen about 3 cents/gal.
The biggest increase was in California, where average retail prices rose almost 40/gal between mid-February and early May. They since have fallen about 5 cents/gal.
The report noted that a number of factors affected the market: crude prices rose significantly and were partly sustained by futures market expectations, lower inventories added price volatility, unusual weather boosted oil product demand and affected refinery production mix, gasoline prices were following seasonal patterns, refinery margins widened ahead of normal season patterns, retail prices moved more slowly than wholesale prices, and the California market experienced additional supply problems.
Separately, the Justice Department is still investigating whether there was collusion behind the price increases.
Also, DOE officials said they are concerned about the oil industry's increasing practice of holding lower inventories.
O'Leary said, "While this cost reducing technique may benefit consumers over time, it leaves oil markets and consumers subject to a greater degree of price volatility."
In Congress, the House of Representatives passed a bill to repeal 4.3 cents of the 18.3 cents/gal federal gasoline tax, but the measure is stalled in the Senate.
Uneven response
Rep. Ed Markey (D-Mass.) and five other congressmen last week complained gasoline prices are dropping too slowly.
Markey said DOE data show that since last April, the spot market price for regular gasoline has fallen 16.3 cents but the retail price only 1.2 cents. In California, the spot price for reformulated regular has dropped 16 cents but the retail price only 5.3 cents.
He said, "This data strongly suggest that oil companies are gouging the American consumer at the pump. When wholesale prices went up, oil companies very efficiently and promptly passed along the costs to the consumer. But when wholesale prices went down, oil companies have been pocketing most of the savings for themselves."
In Markey's simplistic view of the market, the "big oil companies" are solely to blame, and oil executives want to hold gasoline prices up so they can reap stock options.
Reporters should have laughed at those statements, but they didn't. Such overt demagoguery is never funny.
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