Tuesday, June 13, 2000
Gas price increase breeds suspicion
EPA investigates gouging
By H. Josef Hebert
The Associated Press
and Michael D. Clark
The Cincinnati Enquirer
Eric McCallister of Fort Thomas fuels up at the Shell Oil station at Edwards and Madison roads in Hyde Park.
(Luis Sanchez photo)
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From meeting halls in Washington, D.C., to the streets of Greater Cincinnati, suspicions are growing about the recent run-up in gasoline prices.
Federal officials met for two hours with refiners Monday, and the Environmental Protection Agency's top air pollution official said he heard “no good explanation” for soaring gasoline prices in Midwest cities where new requirements require cleaner-burning gas.
At the same time, local business owners are feeling the pinch and there are calls from Capitol Hill for more investigation into the skyrocketing fuel costs.
The EPA and Energy Department said field inspec tors were sent to the Milwaukee and Chicago areas to investigate price increases in recent weeks of 30 to 50 cents a gallon. They focused on refining and distribution, one official said.
At the White House, spokesman Joe Lockhart said the Midwest price increases “seem to be out of whack,” and any evidence of price gouging investigators find will be turned over to the Federal Trade Commission for further investigation.
Officials from eight major oil refineries sat in on the EPA and Energy Department meeting, and further sessions were held later with individual companies.
“We see no good explanation for why the (high) prices exist. ... We think the prices are unfair and inap propriate,” Robert Perciasepe, the EPA's assistant administrator for air and pollution programs, told reporters after the meeting.
He said that while gasoline supplies are lower than normal, “there are adequate supplies” to keep prices in check. The additional cost of the cleaner-burning gasoline, called reformulated gasoline, costs only 5 to 8 cents more a gallon to produce, Mr. Perciasepe said.
“We're suspicious of gouging,” EPA spokesman Dave Cohen said earlier.
In Greater Cincinnati, where regular unleaded gasoline prices are hovering around $1.85 in many locations, some small businesses that rely on fleets of vehicles that are not fuel-efficient are hurting — and their owners, too, are suspicious of the increases.
“I think they are gouging us. It's killing us,” said Donna Fletcher, owner of D&S Delivery in Hamilton. She said her small, three-vehicle delivery service handles about 22 deliveries per day in the Hamilton and Fairfield area.
“The gas companies think that if they get us up over $2 a gallon, and we get used to that price, then everything near that price will seem like (we're) getting a deal,” she said.
Steve Pollak, founder and chief technical officer for PC On Call, said higher fuel costs might force his company to charge more.
With a fleet of 27 vehicles, mostly vans that get about 11 miles per gallon, his company will soon be forced to pass on an estimated 3 percent or 4 percent increase in transportation cost to costumers.
And like many, Mr. Pollak wants oil industry officials to explain such large increases in gas prices during a time when there is no apparent shortage in supplies.
“I feel higher gas prices are not out of the question if they are driven by supply and demand,” Mr. Pollak said. “But I'm frustrated. When there is not enough information out there, everyone gets suspicious.”
Michael Kunnen, president of the Greater Cincinnati Gasoline Dealers Association, said the two main reasons gas prices are higher in Ohio and rest of the Midwest are that more gas stations are company-owned, which hinders competition. The other main reason, Mr. Kunnen said, is the decline in competition since the mega-mergers of oil companies in recent years.
“With the control they have, they can put out any price they want,” he said.
Urvan Sternfels, president of the National Petrochemical and Refiners Association, said some of the price increases in the Midwest stemmed from unexpected problems refiners had with meeting the new, higher vapor-pressure requirements for the cleaner gasoline. Corn-based ethanol, used widely in the region as a fuel additive, reduces vapor pressure and complicates fuel blending, he said.
The Renewable Fuels Association, which represents the ethanol industry, blamed the refiners for not building adequate stocks of reformulated gasoline and the EPA for “failure to make appropriate regulatory changes that would reduce the cost of producing RFG in Chicago and Milwaukee.”
U.S. Rep. Ted Strickland, D-Ohio, is pushing Federal Trade Commission officials to investi gate and supply some answers.
Jess Goode, spokesman for Mr. Strickland's Washington, D.C. office, said the congressman thinks consumers have cause to be suspicious.
“Working folks deserve to pay a fair price at the pump,” Mr. Goode said.
Mr. Strickland last week wrote FTC officials, asking them to investigate whether “price fixing or other improper business practices are responsible for skyrocketing fuel prices in Ohio.”
But Mr. Goode said Monday that “it's too early to say what action (FTC officials) will take.”
Gasoline prices have increased for five consecutive weeks nationwide with the beginning of the heavy summer driving season, but they soared in some parts of the Midwest.
EPA officials said they were puzzled about why the price difference between conventional and the cleaner-burning gasoline was as wide as it has been in the Midwestern areas requiring the cleaner gasoline.
“We do not believe that the cleaner-burning gasoline is causing the major price increases,” Mr. Perciasepe said.
The average price for the cleaner gasoline was $1.84 a gallon in the Midwest, a 23-cent difference from conventional gasoline; $1.56 a gallon on the East Coast, a 9-cent difference; $1.61 on the West Coast, a 5-cent difference; and $1.48 a gallon on the Gulf Coast, a difference of 21/2 cents, according to the DOE's Energy Information Administration.
The cleaner-burning fuel had been required in Northern Kentucky until about six months ago, when it was dropped, Mr. Kunnen said.
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